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Special Microfinance Issue brought out by I4d - The first online monthly magazine on Information Communication and Technology

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  • 1. Vol. VII No. 6 June 2009 The first monthly magazine on ICT4D Microfinance: Leveraging ICTs ICTs for Microfinance One billion opportunities Banking the Unbanked Globally Information for development Microfinancing Ghana w w w. i 4 d o n l i n e . n e t Microfinance Sector in Ghana Microfinance : The Road to Self-sufficiency ICTs and Microfinance ISSN 0972 - 804X knowledge for change
  • 2. Contents Vol. VII No. 6 June 2009 Mail box Features Rendezvous 5 Editorial et Fueling the growth 43 Global Conference on Financing the Poor: Moving info@i4d online.n Beyond Inclusion, 29 December, ICTs for Microfinance 6 Microfinance: Leveraging ICTs 2009, New Delhi, India Sabyasachi Kashyap Exploring the impact of microfinance Dinoj Kumar Upadhyay Banking the Unbanked Globally 12 One billion opportunities The i4d magazine is an extremely useful resource for those of us who are practitioners Gautam Bandyopadhyay Interview in the field of ICT for D. It is well produced, and has informative and enlightening content 16 Microfinance in India Microfinance: A bigger picture 10 Rita Soni, Senior Vice-President, which is very helpful for us to keep up with changes and developments in the field. Many Ritu Srivastava congratulations to the team! YES BANK Inclusion through Prashant Sharma Microfinance Sector in Ghana innovation Deputy Executive Secretary and 19 Microfinancing Ghana Communications Manager Veronica Agodoa Kitti Mountain Forum Secretariat, ICIMOD, Nepal Accounting System in Orissa Columns 26 Panchayats e-Cashbook in Orissa panchayats I have been reading the two previous issues of your magazine and found them really very Shreemanta Kumar Samal, Sanjay Prakash Sahoo 45 What’s on informative. I would like to thank your team for such a valuable magazine on ICT4D. In Fact 46 Microfacts about microfinance Mahendranath Busgopaul Internet Child Safety Foundation, Mauritius 29 Microfinance and Gender Equity Money for women by women Ritu Srivastava I take this opportunity to thank for the whole i4d team for the wonderful edition of the ZERO MASS Foundation 32 Development initiatives community multimedia Gender and ICTs. Loknath Panda Snapshots of Hara Padhy UNESCO, Paris Best Microfinance Institutions microfinance 34 Forbes magazine’s top 50 MFIs solutions I have been very regularly getting i4d issues. Thanks for the efforts put by i4d team. I got FAO-GTZ Microbanking System 40 Technology for microfinancing an invitation to write an article in the magazine International Federation for Information Processing (IFIP). They have made a mention 41 National Bank for Agriculture and Rural Development News that they are writing to me after reading my article on Network community services in Search ICT4D news by date in the sectors of governance, rural India in i4d. Thanks for introducing me (NABARD), India health, education, agriculture and so on. Banking for All to the network!!! E-mail Dr. N.S. Vasanthi Subscribe to daily, weekly, monthly newsletters online or Professor and Head, send request to Department of Biotechnology, 23 Microfinance News Bannari Amman of Institute of Technology, Print edition 38 India News The past issues of the magazine are available online Tamil Nadu, India, 39 World News New! Please continue to send us your Knowledge bank valuable feedback to help us of serve you better. books on ICT4d 25-27 August 2009, Hyderabad, India
  • 3. Subscription Form EDITORIAL GUIDELINES SUBSCRIBE Information for development TODAY! i4d contains articles, case studies and essays on the theme of ‘ICT for development’ Duration Issues News stand Subscription Saving Subscription and related issues. Authors are requested (Year) Price Rs. Rs. US$ to follow the guidelines while sending 1 12 2400 2160 10% (Rs. 240) US$ 200 their articles to i4d. Please also consult the 2 24 4800 4080 15% (Rs. 720) US$ 320 editorial calendar to choose the theme of 3 36 7200 5040 30% (Rs. 2160) US$ 400 your interest. We also accept soft or hard copy submissions of your contributions. We encourage you to share your original research with our readers. The Editor’s decision to select, accept, modify or adjust your write-ups due w Nocribe to space constraints will be final. subs ne! Editorial guidelines are available at onli Editorial_Guidelines.asp All correspondence should be I/We would like to subscribe for 1 2 3 years. addressed to: (circle as applicable) First name............................................................................................ Last name .......................................................................... The Editor-in-chief, i4d Designation/profession ........................................................................ Organisation ...................................................................... G-4, Sector-39, Noida, India Mailing address ................................................................................... City .................................................................................... Tel +91-120-2502180 to 85 State ................................................... Country ................................ Postal code ......................................................................... Fax +91-120-2500060 Tel (o) ................................................... Tel (r)................................................................. Fax .......................................................... Email Email ................................................... Website ............................................................................................................................. Payments for mailed subscriptions are only accepted via cheque or demand draft. Cash payments may be made in person. (tick one and fill as applicable) Please find enclosed my/our cheque/demand draft numbered dated ......................... for Rs......................................... in favour of CSDMS a/c payable at New Delhi. I am submitting this form in person and paying by cash CSDMS team Please use photocopies of this form as required. i4d news i4d, G-4 Sector 39, Noida 201 301, India Tel +91 120 250 2180 to 85 Fax +91 120 250 0060 Now Email available in daily, i4d Editorial Calendar 2009 Month Theme weekly, January Rural BPOs and monthly Feburary e-Agriculture email newsletters! March ICT in Climate Change April ePanchayat Subscribe at May ICTs in Elections June ICTs and Microfinance July Agriculture August Mobiles for Development 4 i4d | June 2009
  • 4. Editorial Fueling the growth Now that it has been widely accepted that microfinancing does not have to be an enterprise that runs on a not-for- profit basis, the challenge that faces us today is to make Advisory Board microfinance more accessible, customised, and effective Dr M P Narayanan, Chairman, i4d while ensuring sustainable growth of the sector as a whole. Chin Saik Yoon Southbound Publications, Malaysia Karl Harmsen It has been rightly said that sound microfinancing strategies have the United Nations University potential to alleviate global poverty. But to do so, we have to find ways Kenneth Keniston to reach the millions of unbanked and under-banked households Massachusetts Institute of Technology, USA who desperately need this support to get out of poverty and stay above the poverty line. Nagy Hanna e-Leadership Academy, University of Maryland, USA Richard Fuchs Several questions need to be answered and a similar number of challenges have to be IDRC, Singapore overcome to reach our goals. With the aid of modern ICT tools it is possible to reach the last Walter Fust mile and also serve the population living in remote areas. But technology is just one of the Global Humanitarian Forum, Switzerland components of this intervention with connectivity taking the lead among the related loops Wijayananda Jayaweera UNESCO, France that need to be closed, apart from the capacity building needs for the population to be served. EDITORIAL BOARD Equally important is the creation of enabling policies that allow and, if required, Akhtar Badshah, Frederick Noronha incentivize the setting up of Microfinance Institutions (MFIs). Also imperative is strong EDITORIAL TEAM regulation and monitoring of these MFIs to curb the incidences of MFI operators Editor-in-Chief Dr Ravi Gupta running away with the savings of their victims. Since the target demography has Assistant Editor Sandeep Budki probably never been exposed to banking services, they also require financial education. Research Assistant Subir Dey Sr. Graphic Designer Bishwajeet Kumar Singh None of these issues can be taken in isolation and have to go hand in hand to provide Graphic Designers Om Prakash Thakur, Shyam Kishore succour from poverty to the disadvantaged citizens of the world. Web Programmer Zia Salahuddin i4d G-4 Sector 39, NOIDA, UP, 201 301, India In this issue, we have tried to bring to you varied perspectives of how different countries, Phone +91 120 250 2181-85 Fax +91 120 250 0060 Email Web organisations and government agencies are combating poverty through financial inclusion Printed at R P Printers, Noida, India with an eye on gender equity. We hope you find this issue informative and thought provoking enabling us all to find new ways to meet the challenges that lie ahead. i4d is a monthly publication. It is intended for those interested and involved in the use of Information and Commnication Technologies for development of underserved communities. It is hoped that it will serve to foster a growing network by keeping the community up to date on many activities in this wide and exciting field. i4d does not necessarily subscribe to the views expressed in this publication. All views expressed in this magazine are those of the contributors. i4d is not responsible or accountable for any loss incurred directly or indirectly as a result of the information provided. Dr Ravi Gupta Centre for Science, Development and Media Studies, 2008 Except where otherwise noted, this work is licensed under a Creative Commons Attribution 2.5 License i4d is supported by: June 2009 | 5
  • 5. ICTS FOR MICROFINANCE Microfinance: Leveraging ICTs This article suggests Over the last decade or so, the world seemed to have woken up to the reality and fund transfers. In the last few years of its existence, many organisations have jumped the ways through that to empower the rural marginalised communities and to alleviate the poverty onto the microfinance bandwagon which includes not-for profit NGOs, development which the existing scenario in the world, they need to be given opportunities to save, borrow and professionals, corporates, commercial banks, international donor agencies, etc. ICT tools and repay loans. Till a few years back, banking institutions, for the purpose of offering The reasons for the enthusiasm varies from the belief that microfinance offers a good technologies can banking services to the marginalised, experimented with subsidised credit developmental alternative to the belief, especially among the commercial banks, bring the poorer which affected the overall performance of the banks and contributed to the rise who have opened microfinance branches for their microfinance operations, that section of the in Non-Performing Assets (NPA). Thus subsidised credit as an option gradually microfinance offers a good, sound banking option. The government has also routed society in the ambit lost its popularity among banks. Moreover more than the cost of credit, it was access various developmental schemes through microfinance. Microfinance leaders are of the microfinance to credit which was considered as the major barrier for the poor. With little or no gaining prominence and it is said that some of the leaders, particularly women, services means to afford the collaterals/mortgages, the poorer section of the society had to have been taking a more active role in other social spheres, including contesting resort to unscrupulous moneylenders for elections for the panchayat and so on2. loans which pushed them further into the The microfinance sector has grown vicious cycle of indebtedness. The reason exponentially over the past few years and behind this was access or the lack of it and the World Bank estimates that there are not interest rate. now over 7000 Microfinance Institutions Microfinance has come to be recognised (MFIs), serving some 16 million poor as the most viable, efficient and result- people in developing countries. The oriented mode of financially empowering total cash turnover of MFIs worldwide the poor. For Robinson “Microfinance is estimated at US$2.5 billion and the refers to small scale financial services potential for new growth is outstanding. for both credits and deposits – that are It is estimated that worldwide, there are provided to people who farm or fish or 13 million microcredit borrowers, with herd; operate small or microenterprises USD 7 billion in outstanding loans, and where goods are produced, recycled, generating repayment rates of 97 percent. repaired, or traded; provide services; work It has been growing at a rate of 30 percent for wages or commissions; gain income annual growth3. from renting out small amounts of lands; However, several issues and impediments vehicles, draft animals, or machinery and to the success of microfinance as an tools; and to other individuals and local industry have cropped up, the primary of groups in developing countries, in both them being: scalability and sustainiblity rural and urban areas”.1 Microfinance of MFIs, and outreach and impact of the also entails the condition of sustainably microfinance initiatives. Thousands of Sabyasachi Kashyap delivering the services and is not merely MFIs around the globe are realising that the confined to credit (microcredit) but solution for the scaling up, and ensuring encompasses in its range savings, insurance, maximum outreach and sustainability of i4d | June 2009 6
  • 6. palmtop computers is typically uploaded to the MIS at the end of the day, either directly in the branch office or via a remote communications link. Furthermore, the roll-out of wireless broadband infrastructure will enable these systems to be always online resulting in true real-time data collection and monitoring of the loan portfolio at branch and institutional levels. Correspondent banking One of the key challenges for MFIs is providing financial services to clients in remote areas including rural areas where the population density is low, the market is smaller and providing service entails high costs. Correspondent Banking – whereby a bank links itself with third party merchants located in remote areas – has emerged as a solution for this problem of outreach. Correspondents manage transactions on behalf of the partner Photo Credit: CARE India institution and are remunerated on a fee-for-service basis. Bank Correspondents are expected to be having long-term businesses, MFIs lies in leveraging the benefits of technology, more specifically and should be respected and trusted in their communities. The information and communication technologies (ICTs). ICTs have Bank Correspondents should also be ‘ICT-enabled’; generally opened new window of opportunities for the MFIs to reach out to equipped with equipments such as an Electronic Funds Transfer at more people, controlling the risks making the business sustainable, Point of Sale (EFTPOS) device, barcode readers and/or keypads, a and bringing down the costs of operation. With new softwares personal computer, etc. They are linked to the partner institution’s specially designed to cater to the needs of the MFIs, mobile servers using a telephone line, cable or satellite link. Post offices, phones, efficient Management Information Systems, among supermarkets, general stores, grocery stores, telecentres, etc, are others, technology can and will in the near future bring about a good examples of Banking Correspondents. In India, commercial paradigm shift in the domain of microfinance. banking entities like State Bank of India, HDFC, have tied up with the respective Service Centre Agencies(SCAs) in the states ICT usage for MFIs under the framework of National eGovernance Plan (NeGP) to The current discourse on and practice of microfinance has provide Banking Correspondent status to the Common Service inevitably redirected itself through the ICT route for maximising Centres (CSCs) equipped with ICT infrastructure and provide outreach and ensuring sustainability. Adoption of ICTs also brings microfinance services through them. about business processes re-engineering because they povice efficient, transparent and cost-effective mechanisms to run the Credit cards, and ATMs business of MFIs. MFIs have readily adopted ICTs for they have In today’s world of banking, consumer credit cards are an been looking for a change agent that will harness the benefits of indispensable part of the bouquet of services offered by a financial ICT tools for best possible management and reduce costs, time institution. Some of the advantages of consumer credit cards and efforts. are reduced costs associated with small transaction lending, unsecured credit, small transactions, and pre-defined credit Management Information Systems (MIS) limits. Other salient features of credit cards include on-demand To monitor the quality, sustainability, and efficiency of the loan borrowing, re-draw facility, and repayment flexibility within portfolio, to measure its development impact, and properly pre-defined guidelines. Since these services address the needs of manage the administration tasks of an MFI, computerised small borrowers also due to their potential to relieve them from Management Information Systems comes in very handy. MIS are their dependency on moneylenders for the same set of services the most fundamental aspect of an MFI’s hi-tech infrastructure that are not provided by MFIs. Due to this utility of credit and it is difficult for an MFI to upscale significantly and maintain cards the concept of Microcredit Cards have emerged and with the accuracy and transparency of its loan portfolio without an more opportunities. A credit card enabled MFI can implement MIS that can grow with the institution. There is no denying the microfinance tuned credit-scoring alogrithm which ensures fact that an appropriate backoffice MIS is the backbone of ICT that clients who have proved their credit worthiness over time innovation for the delivery of microfinance services. through successful business transactions with MFIs can have their However, for MIS to really contribute to the efficiency of the credit limit increased and be given access to additional sources MFI, it has to be accurate, and up to date. MFIs find it difficult of credit. Smart cards have an embedded computer chip that can to maintain updated records as they have their offices in remote store client and transaction data, as well as process information. locations which rely on manual data-entry and paper based Smart cards function as electronic passbooks, thereby reducing transaction records. ICT innovations like mobile computing reliance on printed receipts. However, the introduction of card applications and palmtops at the hands of the loan officers who based services would demand setting up of EFTPOS functionality can directly record the transaction into the MIS can make this and/or Automatic Teller Machines (ATMs). Because all relevant system more efficient and up to date. The data entered into the client data is stored on the card, June 2009 | 7
  • 7. the options because of the ubiquity of its use and popularity even among the poorer section of the society. It is estimated there will be three billion mobile subscribers in the world by 2010. World GSM Association, further adds that mobile phone is the first and only communication technology to have more users in developing countries than in developed countries. Mobile phones have become mobile wallets by facilitating electronic payments in exchange for goods and services. m-Commerce has assumed tremendous significance under the circumstances and this development in m-commerce has positively affected the microfinance industry also with usages like facilitating savings deposits, loan repayments and other funds transfers. For the cost of sending an SMS message, the phone user/microfinance client uses an application stored on his mobile phone to initiate a transfer from his mobile phone account to his bank account. Microfinance softwares In tune with the emergence of service delivery technologies, various softwares have also been developed by technology innovators helping the microfinance industry to tackle challenges associated with efficiency, transparency, outreach and sustainability. The softwares and tools like, FINO (Financial Information Network and Operations), SafalFin, etc., vary in their nature and function. However, their utility to the smooth functioning of the operations are subject to speculation as some of the softwares come with high investments which a startup MFI may not be in a position to afford. However, low cost solutions like Computer Munshi System developed by an Indian NGO named Pradaan has promised to address this issue of affordability for MFIs. Built at low cost, this MFIs can utilise EFTPOS systems and ATMs that do not software aims to improve book keeping of the Self Help Groups need to be always online. This is a significant advantage in areas (SHGs) as also to improve transparency, equity and longevity of where telecommunication services are unreliable and/or expensive. its groups. The model basically aims to improve the accounting One more value addition to the services of MFIs are the use of and book keeping of the SHGs.4 biometric technology (such as fingerprint scanners) which ensure client identification as well as privacy and data security. Conclusion In a nutshell, various experiments for integrating microfinance Internet banking and ICT have been undertaken and even more numbers are Internet Banking, in many ways, has revolutionised the banking going to come in the future. The issue however, is to enable scenario as it provides clients with real-time information about the MFIs to meet their goals by helping them have maximum their accounts, and the ability to transfer funds between their outreach, be sustainable and be transparent in their business accounts. It has become an integral part of the banking operations and processes. ICT can only be an enabler, and not the driver, and by giving clients the liberty of using their own convenient and the real success of MFIs has to be measured vis-a-vis their time to bank, and that too without having to visit the bank, it has social performance and not by their ICT/technology readiness become an empowering tool. MFIs, however, face the challenge and preparedness. of limited or more often than not no access to Internet services of their clients. The rural telecentre network, being rolled out References: across the developing world, could come in handy here too, by 1. Robinson, Marguerite S, ‘Microfinance: the Paradigm Shift from Credit Delivery providing access to the clients. to Sustainable Financial Intermediation’, in Mwangi S Kimenyi, Robert C Wieland and J D Von Pischke (eds), 1998, Strategic Issues in Microfinance, Mobile banking Ashgate Publishing: Aldershot Cellular phones, especially with GSM backbone, due to its 2. Microfinance: An Introduction by R Srinivaan and M S Sriram in Round Table, accessibility and affordability are becoming an indispensable IIMB Management Review, June 2003, (Pg-52-53) communication tool for the poor in the developing countries. 3. Hari Srinivas, The Global Development Research Centre (GDRC),http://www. As per the World GSM Association report, during the year accessed on 29-05-2009 2003-2006, more than 800 million mobile phones were sold in 4. Report of the Steering Committee on Microfinance and Poverty Alleviation, The developing countries. Mobile phones in today’s scenario have Eleventh Five Year Plan, (2007-08 - 2011-12), Development Policy Division, become the only option for communication from being one of Planning Commission, New Delhi, May - 2007, Pg-28 i4d | June 2009 8
  • 8. te r Security Disas ent HIV/AIDS s gem and tool Mana ICTs Environmental 2.0 unity Web omm Cybercrim e using Concerns: C ent eWaste for owerm p Em ICTs for So ICT and Net cial MSMEs wor peace ks in Initiatives Inte rnet c Civi nal/ CTs sitio I The Fuel Crisis ppo ics and O it s tin g Giving Voices Community and Pol ICT udge ing and Assertive R ights: Climate Change er B eam Sexual and Radio end instr Reproductive R in Gd Ma ights an Safe Learning Drinking Water for and The O Grassroots Sanitation Move pen ICT ICTs and ment Statistics Innovations Food Security Ne w g nin Lear ys Internet Wa Governance Another year of i4d is here. A host of issues are to be talked about. Do you work on any of these areas ? Do you have a project that should be covered ? Are you an expert on any of the themes ? Are you interested to collaborate ? Write to us at:
  • 9. INTERVIEW: RITA SONI, SENIOR VICE PRESIDENT AND COUNTRY HEAD - RESPONSIBLE BANKING, YES BANK, Inclusion through innovation In an interview with Sabyasachi Kashyap from CSDMS, Rita Soni talks about YES BANK’s foray into financial inclusion by banking and microfinancing through the Internet, ATMs, debit cards and mobile channels. Rita Soni Senior Vice President and Country Head-Responsible Banking, YES BANK As per the latest census, almost one fourth of the population in products and services to un-banked/under-banked, low-income India lives Below Poverty Line. What role do you see banking communities across urban and rural India. institutions like YES BANK playing here? As of March 2009, Wholesale Lending stood at USD 60 At YES BANK, we are working towards sustainable solutions to million with 16 MFIs, covering an estimated 500,000 clients in poverty through financial interventions by mainstream banking over 1000+ villages. YES BANK offers a comprehensive package activities. Utilising sustainable and mainstream approaches allows of banking and advisory services, dovetailed with the expertise of us to reach the scale which is necessary to reach the 800 million relevant business units within the Bank to use structured capital Indians living on less than US$2 per day. In our young bank, market products to help MFIs leverage access to cost-effective we have chosen to focus on ‘Responsible Banking’, promoting funds from a broader pool of sophisticated investors. The Bank financial inclusion and business solutions to social issues. works as a holistic financial solutions provider working with Where does financial inclusion fit into YES BANK’s scheme different stakeholders, i.e., mainstream investors, rating agencies, of “Responsible Banking”? policymakers and technology vendors resulting in an aggregation YES BANK is committed to creating equal financial opportunities of services, cutting-edge innovation and thought leadership and enabling financial inclusion, but it is our emphasis on required to create a conducive environment for growth of the innovation which is making the real impact. For instance, in industry. microfinance the vision is to go beyond offering plain vanilla YES BANK also stands out for its focus on urban poverty banking to providing the industry access to the mainstream capital using individual lending methodology in a market that has largely markets. This approach helps MFIs achieve scale at a lower cost executed group lending to rural women. One of the ground of funds, thereby resulting in affordable financial products for breaking features of our model is the fact that in setting up the the Base of the Pyramid (BOP). YES BANK has a two-pronged first institutionally sponsored direct intervention model for microfinance strategy to provide easy access to suitable financial microfinance, the Bank has created a benchmark institution that i4d | June 2009 10
  • 10. becomes the reference point for what our wholesale practice strives a vision to address issues of rural India through the previously for in terms of helping transform partner MFIs into commercially mentioned innovative financial interventions, complemented with viable financial services providers for the BOP. Direct Lending is expert advisory services and thought leadership. These practices in accomplished through YES SAMPANN (Hindi for fulfillment), microfinance, ARSB, advisory and thought leadership go beyond currently in its pilot phase with a portfolio of 2000+ micro- the banking sector regulator, Reserve Bank of India’s (RBI) directed entrepreneurs. The business is projected to reach a client base of credit policy mandated through its Priority Sector Lending (PSL) a 1,000,000 with a portfolio size in excess of USD 100 million in requirement, and adopts the spirit of addressing poverty to the 5 years offering products such as micro loans for working capital, core. Below are specific examples where this combination approach insurance and savings schemes. has yielded results: In 2008, YES BANK worked with Jain Irrigation Systems Ltd. Across the world, there is widespread recognition that (JISL) to reach nearly 50,000 small and marginal farmers across information and communication technologies (ICTs) have India. As a testament to this ‘business solution to social issue’, tremendous potential in facilitating the inclusion of the the BANK conducted a comprehensive sustainability report for underserved/un-banked population into the banking network. JISL, outlining both the manner in which they operate as well as Can you share your views about this? specific social and environmental initiatives. Bridging the technology gap between the urban and rural Another important rural client is Buldana Urban Credit population through ICT is undeniably a step in the right direction, Cooperative Society. The financing from YES BANK reaches however YES BANK feels that unless discrepancies in the content, approximately 8,000 rural households across western Maharashtra. standards and delivery of basic, primary/secondary education and The Cooperative has a unique approach of ‘social banking’ which vocational training programmes are proactively addressed, the has built the institution and met the needs of its members. In effectiveness of ICT led initiatives will be greatly hindered. This addition to these financial services, the Bank conducted a detailed opinion and mode of thinking has spurred YES BANK to begin study of the approach, uncovering a gamut of best practices that forging working relationships with NGOs and social businesses can be applied by urban and rural banks. currently working in the education and ICT space to develop The Bank also plays the role of thought leader in several areas effective educational content, especially in the realms of financial including poverty issues. As an example, YES BANK and the literacy, in order to enhance the national curriculum and skills American India Foundation jointly wrote a report highlighting the development programmes in rural and urban India. social and economic issues surrounding rural to urban migration in the country. A key feature of the report ‘Managing the Exodus’ What are YES BANK’s initiatives in providing banking is ways to provide rural populations employment opportunities facilities to the underserved population in the rural areas? and social services through the public private partnership model In addition to the microfinance initiatives already mentioned, in a bid to mitigate their migration to urban areas. YES BANK also has a dedicated focus in the area of ‘Farmer In addition to financing Shriram Transport Finance Company Financing’. The Agri-Business, Rural and Social Banking (ARSB) Ltd. (STFCL), YES BANK facilitated an HIV/AIDS awareness team develops innovative financial models, which leverage the programme for their trucker clients. This programme brought the outreach of various stakeholders in the Agri Value Chain to Bank forward to form knowledge partnerships and synergies with address ‘last mile’ issues. In the last year, the Bank has disbursed the Clinton HIV/AIDS Initiative (CHAI) and the Red Cross. approximately INR 700 crores in direct farmer financing, The programme has reached out to 14 locations, 10 states and impacting approximately 140,000 farmers. ARSB works closely over 10,000 truckers who have been sensitized since this project with Swiss Re and Agriculture Insurance Company of India (AIC) began in October 2007. to facilitate the development and distribution of need-based insurance products for the agriculture sector, such as weather Are the branches operating in the rural areas providing insurance for grapes in the Nashik region. ‘anytime anywhere banking’ facilities? If yes, could you share As an example, YES BANK recently announced its partnership your experiences with this? with Zameen Organic, a farmer-owned producer company aimed A standard feature in all our branches, urban and rural, we offer at closer collaboration between farmers and companies to fortify ‘Anytime Anywhere Banking’ through the Internet, ATM, Debit inclusive and sustainable growth while building a transparent Card and Mobile Channels. Customers can also transfer funds supply chain. This alliance intends to create equal opportunities for at their convenience, from home or office, to over 53,000 bank producers and workers who have been economically marginalised branches across the country using the NEFT and RTGS facility. because of the conventional trading system. The business model They are also given complimentary multi-city payable at par empowers 6500 farmers to have effective and end-to-end control cheque books for ease of payments. Under the aegis of the ‘One on the ‘Fair Trade Organic Cotton’ supply chain which has resulted Branch’ model, customers can access their account from any of in improved economic condition of farmers from the Adilabad the 117 state-of-the-art YES BANK branches, at no extra charge. (Andhra Pradesh) and Vidharbha (Maharashtra) region. We were also one of the first few banks to offer complimentary access to over 32,000 ATMs in the country. Our technology edge Could you elaborate a bit more about your experiences in imparts ‘reach and easy’ access to our rural branches and our the rural areas? ‘anytime anywhere’ facilities have received encouraging response Within the Responsible Banking framework, YES BANK has in rural areas. June 2009 | 11
  • 11. BANKING THE UNBANKED GLOBALLY One billion opportunities Introduction what banks can do to capitalise on this • Simplicity and speed in processing Look and you’ll see an exciting landscape opportunity. • Small product sizes when it comes emerging in the banking arena. One where to loans and low-balance savings there is a billion-strong market actively How to bank the unbanked accounts seeking financial services but remains In China and India only about a third of • Proximity and ease of access largely unattended to. These globally the population participates in the formal • Ba s i c f i n a n c i a l e d u c a t i o n o r distributed prospective customers represent banking sector. In Africa the number is just information since the unbanked enormous earning potential for banks, but 25 percent. India has the second-highest may not understand even elementary constitute the unbanked. number of financially excluded households concepts of banking The unbanked are those who do not in the world – 135 million – after China’s Most banks find it difficult to meet utilise banking services and have limited 263 million. Africa as a whole has 230 these needs because of the high economic banking needs. The unbanked are not million unbanked households, and Central cost of servicing these demands. However, the poorest of the poor. However, they and Eastern Europe and Latin America have a little out-of-the box thinking in devising certainly include those whom banks need 19 million and 42 million, respectively. products that are simple and accessible can to serve but cannot do so profitably in the But irrespective of where in the help ensure inclusive growth. existing banking environment. Though world they might be, this unbanked Some of these measures could include these consumers need access to banking section of society has similar needs for tying up with an NGO or with a retailer and for savings, loans and microfinance, they financial services. Apart from the obvious using village residents and empowerment do not have bank accounts. The reasons requirements of savings, loans, transactions, groups as representatives. These can for this are compelling. and investments, the unbanked have lower customer acquisition costs and • Lack of steady and substantial income certain special needs, which are: increase customer base, thus helping leading to a fear of insufficient funds • Flexibility in savings and repayment banks overcome the high cost challenge. for an account schedules owing to a lack of steady Such groups also help banks mitigate risks • Limited access to banks, especially in income associated with dealing with the unbanked. remote areas An estimated 2.6 million self-help groups • Lack of formal employment that in India are linked to banks, giving precludes a financial history financial institutions access to 40 million • Poor financial literacy • Psychological factors such as mistrust This paper aims to households. It is important that the products are of financial institutions educate the banking downsized without being downgraded to This unbanked billion is not outside the match the unbanked population’s smaller banking sector by choice. An important sector to reach out to requirements by offering low installments reason for their predicament is that banks and flexible repayment options. Banks do not offer them suitable products the unbanked masses also require performance metrics and tailored to their needs. In effect, they have regulatory conditions that are more suited been excluded by the banks’ inability to around the world to including the unbanked in the financial understand their requirements and the mainstream. unwillingness to adopt innovative models by giving examples Some banks are using inter-industry to serve them. However, this billion also constitutes from across the globe partnerships to increase financial inclusion. For example, banks in Brazil have added an enormous opportunity – if banks about initiatives of 100,000 point-of-sale locations to distribute are willing to accept the challenge of products by tying up with retailers. including them with an eye on the bigger some enterprising Not only are these channels cheaper for picture. This paper provides a regional banks but they are also more convenient perspective to this issue and examines banking entities for consumers. i4d | June 2009 12
  • 12. Banks must realise – and they are seeing the light – that since Mobile banking is another way of reaching out to such customers the unbanked have remained unaddressed by traditional financial and is also a huge opportunity for banks in India. According to institutions, they will not hesitate to choose newer players for a TRAI report, the total number of mobile subscribers by March basic banking services such as payment and deposit transactions. 31, 2008 was 261.08 million as against last year’s 165.09 million Collaborating with telecom players, adding a mobile channel, and (an increase of 58.14 percent). This figure shows that in just utilising cross-selling opportunities will go a long way in meeting three years, the number of mobile subscribers has grown over 4.5 the needs of the unbanked. times. India is adding more subscribers per month than any other In many emerging economies, mobile consumers are growing at country. According to the GSM Association (Global Association a much faster rate than bank customers. Mobile banking is taking for GSM Providers), the next billion subscribers will come from off because it is convenient, fast, simple, and secure. Moreover, the BOP (Bottom of the Pyramid) market, of which India will it is a cost-effective option for banks. Gartner has estimated that have the largest share. The growth of mobile phone subscribers there will be 33 million mobile payment users worldwide in 2008, is outpacing the growth of banking customers as also PC and with the Asia Pacific taking the lead. Gartner expects this number Internet users in India. to triple to 103.9 million users in 2011. In 2006, banks were allowed to take the help of NGOs Other forms of branchless banking and e-payment gateways and microfinance institutions as intermediaries in offering such as payment cards and the Internet can also help banks increase banking services through the use of correspondents. This was their outreach. Banks need to experiment and include the next perhaps a factor for many banks that opened six million no frills billion consumers not merely for the socio-economic assistance accounts with low or zero minimum balances between March they will gain. The step will also have a strong business imperative 2006 and 2007. for banks. Not only will a bank increase its customer base, but ICICI Bank, HDFC Bank and Citibank have launched their it will also ensure increasing numbers of future customers as own microfinance programmes. HDFC Bank thus has tied incomes increase. up with NGOs in Andhra Pradesh and Tamil Nadu to make Let us examine how banks are reaching the unbanked in various financial services accessible to the rural poor. Citibank has linked parts of the world, namely, India, China, Eastern Europe, parts up with NGOs. Standard Chartered plans to lend $100 million of Africa, and Latin America. for micro-financing by 2008, up from current commitments of $40 million. India Banks are looking at technology to provide banking services at The Indian banking market is zooming, with assets expected to low cost – and this includes rural banking too. Citi has set up a reach $1 trillion by 2010. An expanding economy, a growing bio-metric ATM as a part of its ‘no frills’ Pragati account for the middle class, and technological innovations are contributory under-banked. The ATM recognises the customer through their factors, according to a Celent report, ‘Overview of Indian thumb impression and can interact in regional languages. Banking Market’. The industry is focusing on the retail side of the market, with China a Compound Annual Growth Rate (CAGR) of 23 percent in Estimates about the numbers of unbanked Chinese vary. The the past five years. However, despite this thrust on retail banking, People’s Bank of China (PBC) estimates that only 36 percent banks will have to come up with creative and simple solutions to of Chinese rural households have access to financial services. As make money in India. This is because India has a huge unbanked one indicator of demand, the informal finance market has been population and unless this is included, neither will banks prosper, estimated at anywhere between CNY 1 trillion ($132 billion) to nor the country. CNY 2 or 3 trillion. Banks have also realised the potential of this market and But the bigger Chinese banks have for many years now have come up with innovative means of reaching it. They are been moving out of rural areas, goaded by commercialisation going back to rural pockets for financial inclusion. State Bank and competitive pressures. According to the State Council of India is drawing up plans to reach out to 100,000 villages. In Development Research Centre (DRC), the four big state banks September 2007, ABN Amro Bank announced its microfinance have reduced their presence in rural areas by over 43 percent in division had provided basic financial support to some 500,000 ten years, closing 30,000 branches in the last five years alone. underprivileged households. Building more branches in the countryside may not always The Chinese government has launched several initiatives be cost-effective. So banks need to explore other options by to test out new forms of rural financial service providers. developing a better understanding of what rural households need Among them: and offer new products and distribution networks to suit them. • The People’s Bank of China in December 2005 launched Providing banking services through ‘Banking Correspondents’ a pilot initiative to establish Microcredit Companies using represented by self-help groups, NGOs and other approved commercial licensing organisations is one branchless banking mechanism. Touch-points • The China Banking Regulatory Commission in December may be set up by such organisations at places commonly visited by 2006 introduced their own pilot, creating new types of the unbanked, such as the village markets or schools. This may be licenses for rural financial institutions supplemented by outreach teams equipped with hand-held devices McKinsey believes that given the reliance on cash in rural on which simple banking transactions can be performed. China and that additional ATMs do not appear to be the answer, June 2009 | 13
  • 13. the existing mobile Short Message Service network could quickly banking options. This also offers banks a channel for growth. and cheaply provide an SMS-based payment system in rural Similarly, post offices, which constitute more than 50 areas. Since the most expensive parts of the infrastructure — the percent of the physical infrastructure for access to the financial network and phones — are in place, this solution would be sector, could provide an innovative POS alternative to reach out relatively low in cost, between $40 million and $60 million. By to the unbanked. forming a partnership, banks, network operators and merchants According to the August 2003 Datamonitor report, banks in could unlock spending. the region are looking to move beyond branch-centric distribution. The Chinese largely rely on cash payments, thus increasing the This includes extending ATM networks and looking at online and importance of the cash-based e-payment channel. Some leading phone banking. The highest growth in IT spending was expected third-party payment providers are adding cash-based and non- to come from Romania and Bulgaria. bank based payment options to their offerings. These include: 1. Cash remittance: Alipay is a third-party payment provider, Africa allowing users to top up accounts with cash through China’s According to the IMF, African countries are enjoying their postal service. This service was launched in March 2007 in best period of sustained economic expansion since attaining selected China Post branches throughout China. independence. Real GDP growth is expected to rise from 5.7 2. Mobile toll stations: Smartpay, China’s leading mobile top- percent in 2006 to 6.8 percent in 2008. Still, only 20 percent of up company, has formed a network of approximately 30,000 families in Africa have bank accounts. dealers. Smartpay dealers allow users with bank accounts to easily use Smartpay’s services, which in turn gives Smartpay access to a much wider range of potential users. 3. Targeting the unbanked with pre-paid cards: e-payment player IPS uses mobile and telephone prepaid cards in order to reach unbanked users. This service takes advantage of the popularity of prepaid top-up cards used for phone bills, online games, and virtual currencies in China. The cards are usually purchased with cash at newspaper kiosks, small shops, and internet cafes. IPS operates a service called Ipay. Eastern Europe In Poland, only 50 percent of the country’s population has a bank account, according to ING Group. Banking penetration was 69 percent in Hungary at the end of 2003. Many East European (EE) residents avoid setting up bank Katimba market, Central Kampala, Uganda. Credit accounts because they lack confidence in the banking system. This mindset is gradually changing as governments encourage Ethopia has less than one bank branch per 100,000 people – a salary payments directly into bank accounts. developed nation like Spain has an average of 96 branches. Even Austria’s Erste Bank has the largest network in the region and in South Africa, where the sector is more sophisticated, only 40 intends to target the unbanked in Hungary, the Czech Republic, percent of adults have bank accounts. But there is a huge demand Croatia, Serbia and Romania. Western banks in EE are focusing for bank services. Finding this demand unfulfilled, millions of on meeting the needs of the younger population. In Poland, only Africans turn to informal services or invest in cattle. 49 percent of people over the age of 15 have a bank account, But banks are increasingly adopting innovative methods. South according to Polish research company Pentor. Africa has physically taken branches to the unbanked, either as Almost 40 percent of Poles who participated in a recent banking prefabricated units, or in vans that make visits to under-served survey attributed the low level of banking penetration to their lack areas. In remote areas, machines have been installed in shops where of savings. Only 5 percent of Polish people use Internet banking, customers print out a slip and present it to the shopkeeper, who against an average of 24 percent in Europe as a whole; 4 percent provides the cash. Some rural branches and ATMs rely on solar of Poles use telephone banking services compared with 7 percent energy and satellite phone. in Europe, according to Forrester Research. The ‘Big Four’ banks of South Africa (ABSA, First National To make it easier for Poles to access banking products, ING Bank, Nedbank Group and Standard Bank) and the government Bank Slaski, the Polish operation of ING Group, has simplified developed the innovative Mzansi account in 2003 which is a some products. The new offerings include a savings account which low-cost transaction account. It enables banks to cover at least offers one flat interest rate and a low-interest credit card. 70 percent of the unbanked market in a relatively short time. Plastic card technology is expected to present the banking The government provided a small subsidy to cover the cost. It is industry with an important means of tapping the unbanked targeted at people who earn less than R2,000 (US$264) a month. market. Moreover, according to Global Insight, electronic It now has more than 4 million subscribers. payments are expected to grow from $3.8 billion in 1999 to $25.8 Studies conducted by Genesis Analytics for the Finmark Trust billion in 2009, thus indicating greater use of non-traditional in 2004 have suggested that point-of-sale (POS) facilities can play i4d | June 2009 14
  • 14. an increasingly important role in providing the unbanked access to basic financial services in South Africa. West African financial services biggies Zenith Bank and Ecobank and multinationals Citibank and the International Finance Corporation have set up the Acción Microfinance Bank in Nigeria. It aims to provide low income earners and entrepreneurs with credit facilities and finance. Mobile banking seems to be the most promising option in Africa. Few Africans may have bank accounts, but many have mobile phones. Wizzit (a financial services provider), First National Bank (FNB) and MTN Banking (a joint venture between Standard Bank and a mobile-phone network), are targeting the 14 million unbanked South Africans. In Kenya and Botswana, 17 percent of the unbanked own El Alto Market. Credit a mobile phone, according to the FinMark Trust. In Kenya, Vodafone and Safaricom, Kenya’s leading mobile operator, about 5.1 million customers and 1800 branches. It has grown launched an m-commerce payment service, M-PESA, aimed at the steadily in recent years by concentrating on personal lending, unbanked in March 2006. Within three months, it had 150,000 car financing, insurance, and investment funds. It helps that customers, with 2,500 new users signing up each day. local interest rates are dropping and that Brazil’s government First Bank linked-up with Nigeria’s second biggest mobile has introduced incentives to increase credit. For example, operator, Globacom. The partners introduced the GloFirst card payroll loans, whereby installments are debited from paychecks in conjunction with the switching company Interswitch. GloFirst are now permitted. can be used to withdraw money, check card balance, print mini In Brazil, banks are using nonbanking outlets, such as kiosks statements, change the Personal Identification Number (PIN) and and even supermarkets, to reach customers. However, the central transfer money to another cash card or bank account. bank’s efforts in the way of promoting community representatives or agents and microfinance efforts are slowly bringing more of the Latin America unbanked into the mainstream. Chile reports the highest penetration and the lowest percentage However, obstacles remain: agent-handled accounts are subject of its population living below the poverty level. It is followed by to transaction limitations, interest rate caps render microcredit Brazil, where the majority of households have checking accounts unprofitable and credit information is scanty. because most payrolls in the formal economy are disbursed Electronic payments in Latin America are slowly taking off, but electronically. Until recently, 40 million Brazilians had no access are hampered by factors such as low income and lack of banking to banking services. Nonetheless, access to consumer credit in penetration. Banks are trying to keep the reform momentum Brazil is mostly limited to the middle and upper class, and even going. For example, Mexico has launched a three-year public- foreign banks target primarily customers with an annual income private initiative to expand the number of chip-enabled point of of at least $20,000. sale terminals. The goal is to divert the use of cash taken from In Mexico, the formal banking sector has targeted only the ATMs to POS debit-card transactions in its continuing battle to top 15 percent of the population, while the other 85 percent is suppress the informal economy. considered too risky and unprofitable. Now, however, more foreign banks in the sector have begun to pay closer attention to the retail Conclusion credit card business and other remittance-linked products. In The numbers involved in meeting the needs of the unbanked Colombia, where 55 percent of the population lives under poverty may seem daunting, but in reality they represent a billion-strong level, access to bank credit is low at 23 percent. opportunity for banks. By paying greater attention to their wants Therefore, Latin America’s huge unbanked population offers an and developing sensitivity to their needs, banks will be able to enormous opportunity for banks recognising their potential. To develop customised products and include the unbanked in their serve the banking needs of a relatively low-income economy with scheme of things. low penetration requires innovative and imaginative non-branch Banks may do well to remember that they have a business solutions. Microfinance and IT are enabling banks to serve the imperative in converting the periphery into the mainstream. excluded at relatively lower costs. Banks are also helping create Gautam Bandyopadhyay financial literacy with the help of community leaders. Principal Consultant at Infosys Technologies Bancomer, one of Mexico’s nationalised banks, is reaching out to the lower-income segment by offering simplified and more References: accessible products, such as pre-paid credit cards or cards with fixed Research by Boston Consulting Group monthly payments. To cultivate a culture of savings in Mexico, Research by Celent McKinsey Quarterly Bancomer has made available a savings account-debit card combo The Economist for a minimum deposit of about $70. The Financial Express Santander Banespa, a Spanish-backed bank in Brazil, manages June 2009 | 15
  • 15. MICROFINANCE IN INDIA Microfinance: A bigger picture The term, ‘Microfinance’ refers to the services. Some major initiatives include that the NFBC must have a minimum provision of a broad range of financial the bank linkage programme under US$ 46,511.6 Net Owned Funds (NOF) services to low-income households the guidance and supervision of the that will make it eligible to accept public and their microenterprises. Financial National Bank for Agriculture and Rural deposits. RBI introduced a new regulatory services generally include microsavings, Development (NABARD) in 1992, the framework for the NBFCs in 1998, focused microcredit, money transfer vehicles setting of the Rashtriya Mahila Kosh to on NFBC accepting public deposits with and microinsurance. Microfinance re-finance microfinance activities of NGOs a view to safeguarding the interests of the services are generally provided by formal in 1993 and the establishment of Small depositors. RBI also established a Micro institutions, such as rural banks and Industries Development Bank of India Credit Special Cell in 1999-2000 to cooperatives, semiformal institutions (SIDBI) Foundation for Micro-Credit suggest measures for augmenting flow of such as non-government organisations; (SFMC) as a financier of Microfinance microcredit. In the same year, NABARD and informal sources like money lenders Institutions (MFIs). On the policy front, established the Task Force on Supportive and shopkeepers. RBI has come out with directives on Policy and Regulatory Framework for Micro various aspects of microfinance provision. Credit. Based on the recommendations of Need of microfinance in India Releasing the fact that Self-Help Groups the Advisory Committee on Flow of Credit Statistics from the World Bank estimates (SHGs) and NGOs are a priority sector, to Agriculture and Related Activities from that more than 87 percent of India’s poor RBI engaged them in microfinance the Banking System, in its Annual Policy can not access credit from formal sources business by registering them as Non- Statement for the year 2004-05, RBI and therefore have to depend on money Banking Financial Companies (NBFCs). stated, in view of the need to protect the lenders who charge them exorbitant As a result, commercial banks, regional interests of depositors, MFIs would not be interest rates ranging from 48% to 120% rural banks (RRBs) and cooperative banks permitted to accept public deposits unless per annum or even higher. This shows have also emerged as important channels they complied with the extant regulatory that the potential market of small money of microfinance provision. framework of the Reserve Bank. lenders, who can lend money according to Through the RBI (Amendment) Act, T h e Mi c ro Fi n a n c i a l Se c t o r the demand for financial services for this 1997, RBI made it obligatory for NBFCs to (Development and Regulation) Bill, section of the society. The provision of such apply to RBI for certificate of registration. 2007, was introduced in March 2007 services, if implemented correctly, could One of the conditions for application was which applies only to three categories of have a significant impact on the poor. Releasing this Table 1: Growth of linked SHG’s in the regions fact, under the Reserve Region Beneficiaries Bank of India Act, 1934, % % RBI undertook regulation March March March March increase between increase between Share of Share of BPL and supervision of all the 2004 2005 2006 2007 2005-06 2006-07 population population banks promoting and doing North 52,396 86018 133097 182018 6% 6% 13% 7% microfinance. North 12278 34238 62517 91754 3% 3% 4% 3% East Regulatory East 158237 265628 18% 18% 394351 525881 22% 29% framework of microfinance in Central 127009 197365 267915 332729 12% 11% 25% 32% India West 54815 96266 166254 270447 7% 9% 15% 14% In early 1990s, there have South 674356 939941 1214431 1522144 54% 52% 21% 15% been many significant state initiatives in the institutional All India 1079091 1618456 2238565 2924973 100% 100% 100% 100% and policy spheres to enable the poor access financial Source: Poverty Estimates for 2004-05, PIB, Government of India, New Delhi, March, 2007 i4d | June 2009 16
  • 16. not-for-profit MFIs: societies, trusts and cooperatives. These Table 2: Region-wise growth in outreach in 2003-04 and 2004-05 are collectively referred to in the bill as Micro Finance MFIs by No. of Outreach - FY Annual Growth Annual Growth Organisations (MFOs). regional MFIs 2005 (%) in outreach (%) in outreach distribution FY 2005 FY 2004 Progress under the SHG Bank Linkage East 18 332476 61.12 32.68 Programme (SBLP) West 2 6,738 31.4 42.15 India has seen an average annual growth rate of 82 percent in providing microfinance services through SHGs in the period from North 3 91317 11.34 19.5 March 1993 to March 2006, in relation to a 110 percent growth South 45 1710323 67.5 51.73 rate in terms of credit amount. SHG Bank Linkage Programme Total 68 2140854 62.86 45.94 has proved to be the major supplementary credit delivery system with wide acceptance by banks, NGOs and various government Source: Poverty Estimates for 2004-05, PIB, Government of India, New Delhi, departments. During the financial year 2005-2006, around March, 2007 620,109 SHGs were linked under the SHG Bank Linkage Table 2 shows that growth is concentrated in two regions, the Programme, it incorporates more than nine million households South and East, which already account for about 95 percent of into the financial sector. membership. The 31 percent growth was recorded in the West, According to the NABARD Annual Report 2007, the western on an extremely small base, while only 11 percent growth was region of India has experienced 63 percent of growth in its entire registered in the North, among a larger base. With financial region. Table 1 shows that the growth rate in eastern region was support from government for SHG programmes the establishment 33 percent and in central region, the growth rate was 24 percent. of a large number of MFIs following the SHG model has The figures also show that the southern region is leading in been registered. the programme. During the financial year 2005-2006, Andhra From the perspective of the legal framework (Fig 1), the Pradesh had further consolidated its role as the leading state in the proposed new microfinance law does not cover nearly 80% of size of SHG movement by holding 279 households participating in these clients since 73% are served by NBFCs or MFIs on the SHGs for every 1,000 households. During this period, the number verge of transformation to NBFCs and another 6% by Section of new loans in Andhra Pradesh, remained about the same but the 25 (not for profit) companies. Such institutions fall outside the number of repeat loans increased by 31 percent/year. Himachal ambit of the proposed law. Pradesh, Kerala, Assam, Rajasthan, West Bengal and Maharashtra formed an intermediate group with 94, 85, 82, 65, 61 and 56 households participating in SHGs for every 1,000 households, respectively. In Uttaranchal and Jharkhand there were less than thirty-two households participating in SHGs for every 1,000. In Jammu and Kashmir, Haryana, Punjab and Arunachal Pradesh there were less than ten households participating in SHGs for every 1,000 of the total households. MFI performance: Efficiency with growth The MFI model in India is characterised by a diversity of institutional and legal forms. The first and most well known MFI, SEWA, was incorporated as an urban cooperative bank in 1974 and demonstrated that poor people were bankable. In the 1980s, a number of registered societies and trusts commenced group-based savings and credit activities on the basis of grant funds from donors. MFIs of all legal forms have their own funds or are built up mainly from; (i) donor grants in the case of societies Source: Poverty Estimates for 2004-05, PIB, Government of India, New Delhi, and trusts, (ii) equity investments and promoters’ capital in the March, 2007 case of companies, (iii) shareholdings in the case of cooperatives, as well as (iv) retained earnings in the case of all three categories, Progress under social performance the main source of funds is debt, borrowed from the banks and MFIs and those who work for MFIs like banks, investors, and apex financial institutions. donors are social enterprise. For any MFI, financial sustainability In the last decade, the MFI model has seen a series of critical is important. An MFI that can cover its costs - has good financial developments in the Indian MFI sector. According to the estimates performance - can grow to serve more clients in more areas. of 2006 Annual Report by Microfinance India, joint effort of Social performance in microfinance is defined as “the translation Care, Ford Foundation and Swiss Agency for Development and of mission into practice in line with accepted social goals”: These Cooperation (SDC), Large MFIs are more efficient in the disbursal social goals relate to: of funds with 81 percent of total assets held as loans, as against • Reaching the poor or excluded clients 75 percent in the case of medium and small MFIs. • Improving the quality and appropriateness of financial June 2009 | 17
  • 17. Poverty Audit The estimates from the 2006 Annual Report of NABARD, Social Rating show that commercial bank lending for the MFI sector has South doubled every year for the last three years. Most of the banks have • Bullock-Cart Workers • ASA Model dedicated microfinance units. Lending has been concentrated in Development Association (BWDA) • SKS Microfinance • ASP • Payakaraopeta Women’s the South but since the agrarian crisis in Andhra Pradesh most • BASIX Mutually Aided banks are expediting their efforts to expand to other locations • Acts Mahila Mutually Aided Coop Co-operative Thrift too. According to these estimates, about 60 percent of ICICI Thrift Society (AMMACTS ) and Credit Society Bank’s microfinance lending consists of loans to MFIs under • SWAWS Credit Corporation India (PWMACS) the partnership MFI model. Under the partnership MFI model, Ltd. (SWAWS) major banks like ICICI Bank are leading the way by partnering North with SHARE and Basix that enabled MFIs to expand lending • CASHPOR Financial and • Rashtriya Gramin Vikas the same amount. Banks like Axis, ABN AMRO, ING Vysya, Technical Services (CFTS) Nidhi (RGVN) Standard Chartered and HSBC have supported 40, 19, 19, 12 and • Bandhan Microfinance • Nav Bharat Jagriti 8 MFIs, respectively. Citibank is providing core funding for the Kendra (NBJK) Indian School of Microfinance, which is part of the SEWA family of institutions in Ahmedabad, and ICICI bank is supporting services training and incubation initiatives by Basix, CASHE-CARE, • Contributing to employment and enterprise growth and MicroSave. • Improving the economic and social conditions of clients and their households Conclusion • Ensuring social responsibility to clients, to staff and to the Though the government proposed the Microfinance Bill in 2005 communities they operate in but there are two important areas of reform that would have a more In 2006, M-CRIL (Micro-Credit Ratings International immediate impact on financial inclusion, at least with respect to Limited) conducted social ratings among MFIs in India with credit services. MFIs most often are subject to misunderstanding support from the Friends of Women’s World Banking (FWWB) by the public, suspicion by local politicians, and destructive and the Ford Foundation. In its rating, twelve MFIs, eight from and ill-informed rumours from competing MFIs. It becomes the south, four from the north, are providing microfinance services critical to understand the reputation of MFIs among various as one aspect of their social performance. Out of these twelve, stakeholders, to what extent this reputation is negative, and why five follow the Grameen model, three the SHG model, three are these reputations are formed. It is also critical that MFIs improve Cooperatives (MACS) and one follows the individual model. transparency, streamline their operations and develop their communications skills to develop a sound reputation and protect Progress through commercial banking themselves against defamation and misinformation. As the sector Most MFIs usually devote their energies in dealing with the grows and competition increases, over-indebtedness of clients uncertainty of loans. The rapid expansion of the MFI model in the becomes a concern. There is a need to find out the extent and last decade has been driven by private commercial banks. Initially patterns of competition, the extent of multiple borrowing, the private banks were motivated by priority sector obligations and whether this is bad or not. There is also a need to think since they did not have any rural branch networks. But after seeing of ways to manage competition so that competition affects perfect repayment rates the banks have realised that investment clients positively. in MFIs is a profitable activity. Ritu Srivastava Gates Foundation gives $20 million to World Bank The Bill and Melinda Gates It will make grants to banks and make IFC the largest investor in the Foundation is giving $20 million to other institutions. The global economic microfinance industry. the World Bank for a programme to crisis means access to financial The World Bank said its data shows provide financial services in developing ser vices has become even more that 69 percent of small farmers in countries. The World Bank will difficult for small farmers and rural India did not have credit with formal use the Gates funding to establish entrepreneurs. financial institutions. In Honduras, what it calls the Agriculture Finance In microfinance, the World Bank Nicaragua and Peru nearly 40 percent Support Facility. Group’s biggest investor is the IFC, a of agricultural producers are “credit- The programme’s mission is to profit-oriented financial institution. constrained,” and less than 1 percent increase access to financial services, The IFC had a microfinance portfolio of farmers in Zambia and less than such as savings, credit, payments and of $498 million in 2007 and planned 2 percent of the rural population in insurance, in rural areas in developing to double its investment to $1.2 billion Nigeria have access to credit from countries as profitable business lines. by fiscal year 2010, which would formal institutions. i4d | June 2009 18
  • 18. MICROFINANCE SECTOR IN GHANA Microfinancing Ghana The microfinance sector in Ghana is a from the general public. fast growing industry. Financial Non Therefore, the inability Governmental Organisations (FNGOs) t o r a i s e l ow i n t e r e s t whose activities are mostly in rural liability through deposit and urban centres directed their efforts mobilisation is a limiting towards the productive poor. The mother factor in microfinance organisation for FNGOs is the Association funding. The regulatory for Financial Non-Governmental framework does not permit Organisations (ASSFIN). Some Rural certain microfinance Banks undertake microfinance projects. services such as insurance for Rural Banks are licensed and regulated by clients by the microfinance the Central Bank of Ghana through the institutions themselves. ARB Apex Bank which is a mini Central Insurance, for instance, Bank in Ghana for the Rural/Community have to be done through Banks. The regulatory frameworks of registered Insurance the Rural Banks limit their expansion Companies. The regulatory into certain geographical areas outside restrictions are to forestall their catchment’s boundaries. Financial instability in the money Service Companies, Savings and Loans market and the economy Companies, and some Commercial Banks of Ghana. have made an entry into the microfinance The 2002 population industry. Their microfinance operations census of Ghana indicated are mostly confined within the urban 20 million people in Ghana. centres for commercial reasons. Credit Apart from constituting a unions also engage in microfinance. The higher proportion of the apex body of all Credit Unions is Credit overall population (51%), Union Association of Ghana (CUA women also dominate Ghana). Credit Unions are owned by its agriculture, producing members or clients. Traditional Susu (daily 70% of the national crop Sale of Mobile phone accessories has become a business in the villages savings) Collectors under auspices of the output, as well as in trading Susu Collectors Associations dominate where 24.7% of the 80.7% the urban and rural areas. Despite tough employed are females, compared to As such, Ghana has seen a significant regulation of this category of microfinance 7.4% of the 84% employed males. A increase in the number of MFIs attempting service providers, operators often run away higher proportion of these women are to provide financial services to the with the savings of their victims. The subsistence level farmers and traders. productive poor. government of Ghana through the Central Given the background that women form Bank is re-tightening the regulation of this a greater proportion of the population, The genesis of ASA Initiative category of microfinance service providers. the potential microfinance market in After working for six years in the Other informal sector initiatives are Ghana is dominated by women. The high microfinance sector at various positions Self Help Groups and Associations who unemployment rate for the (15-24) age ranging from Manager, University of undertake rotating savings and credit to group requires enterprise development and Cape Coast Credit Union to Director their members on systematic basis. financing package to support individuals in (Microfinance), CRAN Microfinance, The Government has been setting up the category, particularly the females who the author instituted ASA Initiative microfinance projects in collaboration are more vulnerable. Microfinance Ghana. During her eventful with development organisations for certain It is clear from the analysis above that a career, she has been succesful in the sectors and/or deprived communities for significant proportion of the economically implementation of the microfinance the past few years. active population is engaged in agriculture projects for the Government of Ghana In Ghana, only Banks and Savings and and the informal sector. These enterprises under the Economic and Social Recovery Loans Companies can accept deposits lack access to institutionalised credit. Programme (ESRP) of five districts in the June 2009 | 19
  • 19. western region of the country and Social investment Projects through microfinance with training to reduce women and in the Abura Aseibu Amankessie district in central Ghana. She youth unemployment and underemployment in the rural and was selected to join a team of five Practitioner Institutions for a urban centres. study tour of the best five Microfinance institutions in Ethiopia and Bangladesh. The purpose of the study tour was to enhance the ICTs for microfinance in Ghana participating organisations’ potential for effective contribution to In Ghana, Rural Banks and other Microfinance Institutions poverty reduction through microfinance in Ghana. As a result of are linked to the big commercial banks. Computerisation and the lessons learnt from the study, she returned and started ASA competition has lead to the search for efficient ways of serving Initiative after analysing the research done about the operations clients. Commercial banks have computerised their systems and and strategies adopted by the other institutions and adapting them network with their branches. This has reduced the risks associated to the Ghanaian milieu. with the transport of money over long distances. Microfinance Over time she has been working with women groups, Institutions keep their reserve money accounts with commercial youth and the productive poor, to enhance their capacity banks and rural banks in the villages. The use of Apex cheque by all rural banks in the country and the fast clearing system facilitate the institutions’ outreach to the microfinance clients nationwide. Challenges Rural electrification project of the Ghana Government has The microfinance activity began with a loan of US$ 1,000 facilitated the extension of Internet connectivity in the remotest from her younger sister Vivian Tseyi (her lifetime susu rural areas. Access to solar power in Ghana has complemented savings) which Kitti lent to the first 10 women in 2006. the efforts of electrifying remote places in Ghana for effective In the same year the company was able to source a loan of ICT usage. This has greatly facilitated the smooth functioning US$100,000 from a local investment company to support of offices and mobile micro financing in almost every part of the microfinance business. Timely loan repayment led to the country. the approval of additional US$900,000 in 2007. However, Mobile phone networks have been extended to almost all the the high domestic interest rate of 31% which is currently villages in the rural areas of Ghana. With the influx of foreign at 39% has negatively impacted the reserves of the initiative telecommunication companies, there is high competition among and it’s capacity in making clients’ business successful. The the players hence cordless home mobile phone sets, Kasapa Home high domestic interest rate has, therefore, limited the ability and Office Phones, were provided free to households as a strategy of the initiative to expand its activities and reach the larger of connecting all homes and offices with mobile phones. Because of underserved population. the free and low-cost handsets (ranging between US$4 - US$10), Coupled with the high interest rate is the low capitalisation the use of mobile phones has helped extension of microfinance on lending to the microfinance clients. Lack of adequate to rural communities in Ghana. Loan officers communicate funding has become a limiting factor in reaching out to the effectively with group members at anytime and anywhere, even deprived communities who are still out of reach of these in the farms. Head office and branch offices are in contact with microfinancing institutions. To tackle this, ASA Initiative officers on the field all the time through mobile phone network. has started to look outside of the domestic funding market to For instance, communication from Tigo (a popular cellular service garner adequate funds. The organisation has been contacting provider in Ghana) to Tigo network cost less than US$1 (US$ potential low interest fund providers/financers to help expand 0.7) from 6.00am to 6.00pm. its funding capacity to reach out to many more rural and The Internet can be accessed on mobile phones and in ASA urban poor households through microfinance to improve Initiative for example, all microfinance loans for approval are their livelihood opportunities. confined in one page credit memoir report and the soft copy ICT for development and computerisation of the is sent through email to all the members within the approval operations for efficiency called for heavy initial investment. committee who are based out of different offices and towns. This was a big challenge and through careful planning Loan Through Internet conferencing within a minimum of 5 to 30 Performer software was purchased in the year 2008 from minutes loans approvals are given and feedback sent through email Crystal Clear Software, Uganda to computerise operations. for loan disbursement. This has reduced a lot of paper work, also For full computerisation and branch networking to take reduced the time taken for loan approval and made the entire place, a bigger office building was needed where the head system faster and flexible to reach out to many rural and urban office would be set up. The initiative was able to acquire a clients within the shortest possible time. two storey building of which renovation would be completed in the year 2010. Another challenge was attracting quality human resource. Using ICTs to reach the unreached It is not always easy to connect all remote and rural areas. The Initially as a young company, professionals were not attracted advent of cost effective ICT solutions will enhance the coverage because of fear of job and income security. However, as the of microfinance to the underserved masses in Ghana, who initiative began to offer remunerations slightly higher than mostly reside in remote rural areas. A clear manifestation of this that of the Commercial Banks, it has now attracted graduates has been seen in the case of the economical and sometimes free from the universities and polytechnics, some of whom were availability of mobile communication systems and their impact earlier working with the Commercial Banks. on Ghanaian microfinance. ICT tools can be employed to collect i4d | June 2009 20
  • 20. loan repayments and savings on the field and all the related data potentials and opportunities within their settlements. The rural entry work can be computerised to decrease the transaction entry clients would be assisted through ASA Initiative Cash Crop Project time and costs. Even the above-mentioned change in transaction to acquire land of sizeable dimensions to cultivate cash crops for initiation and completion can go a long way in reducing staff and long term sustainable income generation. Traditional and non operational costs incurred in extending microfinancing services traditional cash crops would be cultivated for export and as raw to the masses. The lower operating costs will translate into the material for domestic industry. ability to serve more people. The plan will begin with a coconut plantation project from the coastal areas of the Western, Central and Volta regions of The road ahead Ghana. This initiative has been instituted in collaboration with An additional one hundred thousand households will be covered the University of Cape Coast (Ghana) and University of Udine in each of the ten regions of Ghana with microfinance in the near (Italy). Lack of adequate funding is still a hurdle here. future. ASA Initiative intends to have it’s microfinancing activities affect the whole community and the macro economy of Ghana. Investment in information capital - computerisation and The organisation believes that in order to make the entire system networking of ASA Initiative’s branches more effective microfinance initiatives should be linked to the Current and future microfinancing branches of ASA Initiative positive impact and development of the clients, the communities would be computerised for effective MIS and loan tracking. that the poor are part of and the economy within which they Growth challenges would be overcome through the establishment live. This has a give and take effect. Positive development has a of robust MIS therefore the quality and the base of information multiplier effect on the economic and social lives of the affected capital would be expanded for effective, efficient and economical communities and the economy as a whole. microfinance delivery to cover the ten Regions of Ghana. Establishment of Light Industrial Area Quality management and human capital development As part of its microfinance project, ASA Initiative is collaborating Proactive development of human capital base of the initiative is with the local Government to establish Light Industrial Area crucial to achieving professionalism. ASA Initiative is committed for one of its main market segments, Forum for Small Scale to continue with the strategy of attracting, maintaining and Business Association (FOSBA). The light industrial sector is a new motivating quality human calibre to combine with other corporate community all together which is going to be developed. 153 acres resources in achieving maximum economy of scale for the benefit of land has been acquired near a village called Mpeasem. The land of clients and other stakeholders. has been surveyed and registered with the Local Government. The demarcation, construction of roads, extension of electricity, water, Pension plan for microfinance clients clinic and other social amenities are ongoing projects to be funded Liaising with investment companies to establish pension savings by the Central Government through the Local Government. This for clients is next on the agenda of the Initiative. Discussions have has been done to reduce the cost of land per client. been ongoing with Data Bank Group, a large investment company Further development work has been delegated to ASA in Ghana, to establish a quasi long-term mutual investment Initiative. Workshops, stores, office buildings and residential fund for microfinance clients into which small monthly savings/ buildings would be constructed to economically establish the investments, as a security for their old age would be contributed productive poor from the rural areas and poor migrants from into. This initiative would begin during the last quarter of 2009 the city centres. The very poor or the poorest of the poor would to cushion clients living during the time of their life when they be assisted with microfinance to own a residential house(s) to have retired from active business. generate sustainable rent income for living. Microfinance plus business establishment would be the focal step. ASA Initiative’s Future of the microfinance sector in Ghana microfinance branch would be at the centre of the site to cater to A majority of productive Ghanaian women have meagre incomes the needs of the clients. The philosophy is based on focusing on and live in abject poverty, ignorance and struggle for one square the success of the clients. meal a day, lack clothing, shelter and other basic necessities. It is expected that the pilot project would be replicated in all Even though it is expensive for financial institutions to maintain the other nine regions of Ghana. This will positively contribute to electronic accounts for them, they are bankable provided an the new community in terms of jobs, improvement of economic effective methodology is employed. However, these poor condition and overall well-being of the target group. The ultimate productive households normally rely on the mercy of local money goal would be positive contribution to the GDP annually. lenders who charge exorbitant interest rates ranging between 10% to 100% per month. The resultant effect is the perpetuation of Cultivation of cash crops for export and debt burden which finally erodes their businesses and thereby domestic industry increasing the poverty burden on the households. About 70% of the population of 20 million Ghanaians are Microfinance has now become a household word in Ghana. engaged in agriculture and most are at the subsistence level and Every household is talking about microfinance as a means of they reside in rural areas. They are under the grip of poverty and achieving sustainable livelihood. Hence, it is clear to see that its concomitants on the livelihood of these households. The break there exists a large market for microfinance which is yet to of the poverty chain is in the mirror of developing the economic be reached. June 2009 | 21
  • 21. The Government of Ghana has identified microfinance as member organisations. GHAMFIN has set up a sub-unit ASSFIN one of the main tools for poverty reduction, in promoting Small as part of it’s effort to gradually improving its capacity to support and Micro Enterprises and private entrepreneurs into middle the member micro-finance institutions effectively. This came up as income level by the year 2020. The Government has therefore a result of commercial financial service providers such as Financial been creating enabling legal and regulatory framework to enhance Service Companies, Savings and Loans Companies and some Rural future operation of microfinance activities in the country. This Banks entering into the microfinance arena. An effective leadership would augment ASA Initiative’s activities in poverty alleviation is crucial to the future of microfinance in Ghana. and economic development. With the introduction of microfinance as a diploma As part of its vision 2020 and poverty alleviation strategies and degree courses at the University of Cape Coast, Ghana, the Government often collaborates with local microfinance more research work would be undertaken in microfinance in institutions, mostly FNGO’s and Rural Banks to implement the near future which aim to serve as a basis of industry growth Government initiated microfinance activities for some sections and improvement. Integration of ICTs in microfinance is of the deprived populace. Some of these projects include envisaged to boost the future growth of microfinance initiatives Microfinance and Small Loans Centre (MASLOC), Emergency as a whole. Social Relief Programme (ESRP), Poverty Alleviation Fund, Local Initiative Fund etc. The goodwill of the Government of Ghana in embracing microfinance as major tool for poverty reduction has mirrored a very bright future for the industry. The industry is a Veronica Agodoa Kitti fast growing one with large numbers of people underserved due Managing Director to low capital base of the players of the industry. ASA Initiative The umbrella organisation of microfinance, Ghana Micro- Ghana finance Institutions Network (GHAMFIN), has been undertaking structural reorganisation to effectively oversee the activities of RBI goes rural with SHGs Reserve Bank of India (RBI) plans to Incidentally, although PACs are in the banks have proven their ability to engage self help groups (SHGs) and principal allowed to work as business manage accounts and handle money. The primary agriculture credit societies correspondents, they are not being used local flavour of the (PACs) as business correspondents (BCs) for this purpose. Concerted efforts may be SHGs and their intimate knowledge to ensure greater banking penetration made for using PACS as BCs where such of the areas in which they operate as in the country’s interior rural belt. PACS are functioning also their association with banks make The banking regulator has decided to them a good choice to act as business make use of the banking correspondent correspondents, the report said, adding model extensively to provide banking that RBI might consider allowing banks facility to some 1 lakh unbanked to use mature SHG group leaders as BCs villages of population in excess with IT solutions in place to ensure of 2,000. requisite safeguards. RBI Deputy Governor Usha At present, banks are treading Thorat recently said the central with caution in using business bank would have like banks correspondents widely. Some quarters to achieve the target by 2011. have voiced concerns over the Besides trying to fulfil the target safety features and possible misuse in time, RBI said the focus would of this model. also be kept on maintaining quality In this light, the banking regulator of banking services. in its annual policy review of 2009-10 Banking penetration doesn’t mean has announced that it would form a merely opening of bank accounts. Banks group to review the eligibility of persons need to ensure that account holders use who can act as BCs. It has underscored their bank accounts purposefully. We the need to take into account the would also like banks to offer credit reasonably well, the RBI has recently said experience of a few large BCs, the need facility, insurance cover and remittance in its draft report on lead bank scheme. to facilitate recycling of cash, apart from facility to rural account holders, Ms Likewise, the report observed that SHGs the regulatory and consumer protection Thorat has recently said. which have been successfully linked to perspectives. i4d | June 2009 22
  • 22. Microfinance News downturn. “MSMEs are facing a slump in their requirements from the MSME demand for exports and services, besides sector. The ministry is likely to hold a build-up of large inventory, delayed meetings with the government in the payments and slowdown in remittances. near future to discuss various issues and She also pointed that MSMEs are the problems faced by small and micro units “worst sufferers” when a disaster strikes. in the country. Hence, these sectors must be provided “About 42 million people are employed relief on the lines of the National Equity in the MSME sector in India, contributing Fund as recommended by the Chakraborty heavily to the country’s total industrial Information for development Committee. output and exports. Evidently, the segment Indicating the government’s initiatives plays a major role in the economic growth towards the same, Usha said, “RBI had of the country. With the government taken unprecedented’ measures to ensure planning to take measures to provide Farm credit likely to be liquidity and credit flow to MSMEs to help support to the MSME sector, growth of the enhanced in India the sector during the recessionary period national economy is likely to get a boost,” With inclusive growth as the buzzword, the now and a special refinance facility under says H Shivdas, proprietor of a small-scale Government of India is likely to enhance Section 17 (3B) has also been extended apparel exporting firm in Trivandrum, farm credit by nearly Rs 50,000 crore, to them.” Thorat also indicated that the Architha Exports. enlarging the scope of subsidised credit to regulator has granted in-principle approval The government is also planning to over 5 crore farmers across the country. for setting up to four credit information bring about reforms in the Khadi sector, During a meeting of Finance Minister agencies to ensure better credit disbursal which has significant MSME presence. Pranab Mukherjee with heads of public and monitoring. Furthermore, it intends to launch the sector banks, the former emphasised that As per RBI guidelines, it is mandatory different schemes recommended by the banks should increase spending on labour- for domestic commercial banks (public National Manufacturing Competitiveness intensive sectors such as agriculture to and private sector) to provide 40 percent Council (NMCC) to enhance productivity boost the purchasing power of people. of Adjusted Net Bank Credit (ANBC) to of MSMEs. Though the Minister remained tight- priority sector, which includes agriculture lipped on sectoral targets for banks, sources and micro, small and medium enterprises. Sage India launches payroll said farm credit would go up by more than A recent finding revealed that major banks software for SMEs 16% this year bringing under its cover an failed in achieving agri-advance targets Software solutions provider Sage India additional 50,000 people from 4.5 crore until November 2009. The list includes launched its payroll software designed earlier. In the 2008-09 fiscal ending March major banks - Bank of Baroda, Oriental for small and medium businesses to 31, total farm credit was Rs 2.80 lakh Bank of Commerce, United Bank of India, help companies with their salary- crore which is expected to go beyond Rs Corporation Bank, Union Bank, Punjab related operations. The Payroll software, 3.25 lakh crore this year. It is believed that and Sind Bank and Syndicate Bank. ‘Sage Pocket’ comes in two versions the Congress-led UPA government would — professional and premium — along bring down the existing rate of interest for New government bringing in with online modules available as add-ons. agriculture credit hovering around 9%. new hope for MSMEs The Sage Pocket Professional solution Even after a 2% government subsidy, the The MSME sector in the country might is configurable and allows the user to set rate is still at a high of 7%. get fiscal aid from the government soon. statutory regulations, calculate income The newly formed government, led by tax, track reimbursements and generate RBI asks banks to review the United Progressive Alliance (UPA), pay slips. Employee master details can be MSME lending policy is focused on addressing the credit maintained with the option to upload all Speaking at the one-day conference requirements of this cash-strapped sector. the necessary documents. Sage Pocket on ‘Learning from recession, saving an In the next few months, the government has been simplified for Partner network economy: Towards an MSME agenda’, hopes to evolve mechanisms and structures of Sage to easily sell and implement it for Usha Thorat, deputy governor, RBI, to ease credit access to the MSME sector their customers asked the banks to review their credit which is largely unorganised. It has Further, the Sage Pocket Premium policy towards micro, small and medium proposed a separate fund for enterprises solution is an advanced version for multi- enterprises (MSMEs). in the unorganised segment which the user, multi-firm and for up to 1,000 Acknowledging the importance of Ministry of MSME would push for in the employees. With a starting price of Rs sector, she said, “About 12.8 million coming months. 25,000, Sage Pocket is now available with MSMEs provide jobs to over 300 million In a bid to help MSMEs further, the all authorised partners of Sage. Meanwhile, people and account for 39 per cent of the ministry would also propose a ‘Procurement Sage Pocket’s set of modules available manufacturing sector output and 33 per Policy’. Once this policy is implemented, online enable employees to have an online cent of exports.” Thorat reasoned that targets would be set for the government access to information relating to human MSMEs have been badly hit by economic departments and organisations to source resources, leaves and claims. June 2009 | 23
  • 23. ??????/ Snapshots of micro Mahila Sphurthi Developed by: CoOptions A scalable product cum solution for banks, NBFCs, NGOs and private enterpreneurs who are in the space of micro-finance. Mahakalasm MIS Developed by: Ekgaon Technologies The MIS will allow central tracking of the accounts, financial position, loan repayment performance and related information for a community of SHGs. Financial Accounting and Management Information System (FAMIS) Developed by: BASIX’s software partner, Sathguru Management Consultants It was designed to be a comprehensive solution for accounting and management information needs. i4d | June 2009 24
  • 24. ofinance solutions Banksoft Developed by: Processware Systems, Bangalore A software that enables branch automation, head office consolidation, and inter-branch reconciliation. A user-friendly software package, BankSoft provides integrity, flexibility and security to the user. MIFOS Developed by: Grameen Foundation’s Technology Centre Mifos is a centralized management information system (MIS) platform featuring a user-friendly browser-based web interface running on top of a robust MySQL database. The open source framework allows microfinance institutions to select local developers to assist with the customisation, implementation and maintenance of their software Financial Information Network and Operations (FINO) Promoted by: ICICI Bank FINO is a biometric enabled multi-function card for end users which can be part of a portable system. It will offer the advantages of a smart card, point of sales terminal advantages for the front end services, banking, software performance and reporting MIS for back-end as well as information services to all MFIs. June 2009 | 25
  • 25. ACCOUNTING SYSTEM IN ORISSA PANCHAYATS e-Cashbook in Orissa panchayats Computerisation has been introduced deployed in each Block Panchayat. Usage for Block and DRDA. PAMIS is a tool in District Rural Development Agency audit of the system confirmed that the for Non-Profit organisations engaged (DRDA) and Block Panchayat level to system was prone to wrong entries by the in development work. PAMIS helps maintain transparency and accountability semi-skilled Block Cashier. In order to plug Non-Profit Government organisations to in administration and finance. To start with the loophole in the system and to prevent implement their projects and programmes the process a small tool namely PRIAsoft incorrect entries an Enterprise-level double in a timely manner and within the available (Panchayati Raj Institutions Accounting entry accounting package was envisaged. budget. PAMIS, also helps the Project Software) was developed by National This application was also mandated to Directors plan and monitor all aspects of Informatics Centre, Orissa State unit. It capture the daily financial transaction and their projects and their programmes. captures the month-wise/scheme-wise prepare the abstract report for monitoring Designed to manage core financial accounts inflow and outflow in shape of a number of anti-poverty schemes/ and physical aspects, PAMIS is easy to cash, bank, treasury and advance of the programmes. Therefore, it was decided to install and implement. PAMIS manages 3-tier Panchayati Raj Institutions i.e. use accounting software available in the all accounting needs of an organisation Gram Panchayat, Block Panchayat and market. These accounting packages are effectively. All routine features of Zilla Panchayat. As a result, at the end of targeted at small trading, manufacturing accounting are built into the software. To each month the funds flow statement of units. Apart from accounting, they offer maintain the daily financial transaction at 3-tier PRIs is available. After the successful features such as costing, sales and inventory the Block and DRDA level, PAMIS has deployment of PRIAsoft, further need- management. However, there are hardly been implemented in all the 344 block based projects were taken up within the any solutions available for Non-Profit/ and DRDA locations and the manual Cash availability of funds for better benefit of Government organisations like Block Book has been replaced by Computerised the rural poor. and DRDA. During this process, Xavier Cash Book. This exercise was started during 2003- Institute of Management, Bhubaneswar 04 by computerising the Block Panchayat. offered a solution to provide an application The software can be operated in Two desktops and a Computer Programmer namely PAMIS (Project Accounting the following environment having B.E and MCA qualification were and Monitoring Information System) Operating environment: • Server operating system: Any operating system that supports Oracle database • Database: Oracle RDBMS • Client operating system: Windows 98, Me, 2000 or xp • Graphic User Interface: Developer 2000 runtime Platform: • Online Web-based version deployed • Offline batch processed Standalone version deployed What is PAMIS? The version of PAMIS used by the Department of Panchayati Raj is called Panchayat Accounts Monitoring Information System. It is capable of capturing daily financial transaction of PAMIS Training Programme in Sundergarh District DRDA/Block based on the double entry i4d | June 2009 26
  • 26. accounting system. To start with PAMIS, Master Data for Accounts, Budgets and Projects are to be initialised, which was initially bundled in the software by Panchayati Raj Department, Govt. of Orissa before installation in the Blocks and DRDAs. Then daily financial transactions are entered in 3 types of vouchers designed by Panchayati Raj Department, Govt. of Orissa. These 3 types of vouchers are Receipt, Payment and Journal. For ease of use, the manual vouchers have been colour- coded, green for receipt, red for payment and yellow for journal (advance adjustment) vouchers. Block Cashier prepares the manual vouchers based on the daily financial transaction and enters the data into the package. Then the software takes care of the generation of cashbook, journals, consolidated cashbook of Panchayat Samiti (Schemes) and Government (Salaries including PAMIS is implemented in Phulbani Block of Kandhamal District Teachers’ salary), separate cashbook for Panchayat Samiti and Government, subsidiary cashbook for all schemes under Panchayat Samiti, advance ledger, balance sheet, receipt payment statement, • Financial performance monitoring income expenditure statement and so on. Impact analysis: Currently, PAMIS is operational in 314 Block Panchayats and 30 Zilla Panchayats in Orissa. • PAMIS generated cash-bank book is official. • There is no manual cashbook in Block or DRDA of the State. • PAMIS generated reports are Comptroller and Auditor General compliant. • Chartered Accountants, Auditors are using PAMIS-generated receipt payment statement for making audit reports of Blocks and DRDAs. • It is also developed in accordance with the Panchayat Samiti Accounting Procedure Rule of the Government of Orissa. Implementation procedure The chief architect of PAMIS is Professor Gopal Krishna Nayak PAMIS Screenshot Director, IIIT (Ex-professor of XIM, Bhubaneswar) who never thought that a semi-skilled Block Cashier will implement this software by understanding the Golden Rule of Accounting Functional features of PAMIS are enumerated below: Panchayati Raj, Orissa • PAMIS is an accounting software Simplification of Accounting Procedure in PAMIS • PAMIS is a project planning software Accounts Head Debit (Dr) Credit (Cr) • PAMIS finds true expenses for a project not it’s Asset Increase ( ) Decrease ( ) allocated costs. Liability Decrease ( ) Increase ( ) • PAMIS treats a project as a complete accounting entity not Income Decrease ( ) Increase ( ) merely a cost centre. Expenditure Increase ( ) Decrease ( ) • PAMIS monitors project financials • PAMIS monitors physical activities of projects • PAMIS ensures transparency, accountability and Procedure. According to him “PAMIS is a dream project for us, the responsibility challenges of getting accounts done by non-accountants, getting a • PAMIS is a tool to obtain success in project planning, transparent system accepted by block-level functionaries, usage of monitoring and execution technology by non- technocrats are stupendous. However, when PAMIS was used by all Blocks and DRDAs in Orissa, it became Modules of PAMIS are as follows: • Double entry accounting Golden Rule of Accounting Procedure incorporated in PAMIS • Project-based accounting Rule 1 : Debit what comes in, Credit what goes out • Location-based accounting Rule 2 : Debit the receiver, Credit the giver • Physical activity monitoring Rule 3 : Debit all expenses/losses, Credit all incomes and gains • Financial budgeting June 2009 | 27
  • 27. the very first enterprise software that was rolled out on such a • Once this data is uploaded on to the PRIASoft portal, the large scale in the government sector.” citizen-centric reports are available in the public domain. He devised a simple procedure and advised all Block Cashiers Once PAMIS is uploaded online for all Blocks and DRDAs, to keep this procedure beneath their table glass and keep it in at the end of each day anybody can analyse the progress made their mind while preparing manual vouchers before entering the of each block. However, on pilot basis, some blocks of Cuttack data into the computer. District and Kandhamal District are implementing PAMIS in Gaining from his vast experience and strong willingness of online mode. After success of this pilot, the same will be rolled high-level Administrators at the State Panchayati Raj Department, out for all Blocks and DRDAs. These facilities are not available a training calendar was made and trainings were conducted at in the accounting softwares available in the market. District Headquarters with separate resource persons having expertise in IT and Accounts. Cost Accountants, Chartered Conclusion Accountants, IT Specialists travelled throughout the State and This mammoth task is operating successfully at Block and imparted training to officials starting from Project Directors, DRDA level with the help of all stakeholders of Panchayati DRDA, Block Development Officers, Head Clerks, Computer Raj Department, Government of Orissa starting from Gram Programmers to Cashiers. Hands-on training to generate cashbook Panchayat, Block Panchayat, Zilla Panchayat to State. The from PAMIS was imparted to these officials. recognition of e-Cashbook as the official cashbook of the state of Orissa has created a desire among all stakeholders to Special Features of PAMIS : accomplish its requirement for efficient and desired benefit of The PAMIS software has three dimensions i.e. Accounts, Projects rural India in time. and Location. • It has the capability to consolidate block-wise data to prepare district-wise accounting reports and structured MIS reports. • Besides three types of transactions i.e Receipt (either Bank or Cash), Payment (either Bank or Cash), Journal, two new types of transactions were innovated. One is Receipt Mixture (RC) that captures both cash and bank receipts in one transaction. The other one being, Payment Mixture (PM), which captures the financial transactions involving both bank and cash disbursement and adjustment of advances. • The consolidated cashbook in PRIASoft format is generated through PAMIS at the end of each month and is transmitted Shreemanta Kumar Samal Sanjay Prakash Sahoo to the PRIASoft portal of National Informatics Centre IT Specialist and MIS Nodal Vice-President (Operations) through file transfer protocol (ftp) from the stand alone Officer, NREGS Cell, Panchayati CSM Technologies Ltd. desktop computers of Blocks and DRDAs. Raj Department, Govt. of Orissa atom technologies signs up with Sahayata atom technologies, an Indian mobile women become self-employed and repayment collection. atom’s mobile payments service provider has joined operate small businesses to support based m-Collections solution provides Sahayata, a Micro-finance Institution their livelihood. Since these women are better reach to these geographical (MFI) headquartered in Udaipur city located in remote rural areas it often locations by using mobile connectivity. in Rajasthan, India, recognised for Sahayata’s employees carry Java working in the area of socio-economic MIDP 2.0 mobile handsets with m- development of women from weak collection application loaded in it. economic backgrounds. atom’s m- This application helps them to connect Collections solution model will directly with the backend operations of provide Sahayata with a fully developed Sahayata on real-time basis to fetch the mobile solution for distributing customer data for providing efficient loans and managing collections of and cost effective service. This has loan repayments. been possible because these remote Sahayata provides micro loans becomes difficult for Sahayata to reach locations are well connected with to rural women with an aim to help them for disbursal tracking and loan mobile coverage. i4d | June 2009 28
  • 28. MICROFINANCE AND GENDER EQUITY Money for women by women This article Why target women? covered in the report, 970 are in Sub- Traditionally, women have been facing Saharan Africa, 1,677 are in Asia and the looks into the discrimination in access to credit and other financial services. Commercial banks often Pacific, and 579 are in Latin America and the Caribbeans. role of MFIs focus on men and formal businesses and neglect women who make up a large and Africa in empowering growing segment of the informal economy. On the other hand, microfinance often According to the World Bank’s International Finance Corporation (IFC), women own women to get targets women as 85 percent of their clients are women. Therefore, targeting women about 48 per cent of all enterprises in Africa. Around 61 per cent of borrowers out of poverty borrowers makes more sense from the public policy standpoint. From a business among the reporting MFIs in Africa are women. Unregulated MFIs serve the and enable them point of view, it has been observed that women clients register higher repayment highest percentage of women borrowers who represent just over 50 percent of to contribute rates. They even contribute larger portions of their income to household consumption borrowers from African cooperatives, 63 percent of borrowers from regulated in the nation’s than their male counterparts. MFIs, and 69 percent of borrowers from unregulated MFIs. Among almost half of development The global scenario the reporting unregulated MFIs, more than The Microcredit Summit Campaign 2006 70 percent of the borrowers are women. reported that more than 14.2 million One explanation for the variation is that among the world’s poorest women had unregulated MFIs include NGOs and access to financial services. Around 74 projects that specifically target women. percent of the 19.3 million poorest women Most of the MFIs target clients groups are served microfinance services. More that are most vulnerable such as women than 3,300 Microfinance Institutions and or people with very low incomes. (MFIs) have reached 133 million clients Some of the MFIs who changed the lives by providing microloans in 2006. Out of women in Africa are: of these 133 million clients, 93 million were among the poorest when they took Kenya Women Finance Trust (KWFT; their first loan and 85 percent of these poorest clients were women. According to In 1981, a group of women came together this report, 99.3 percent female clients are and formed the Kenya Women Finance using solidarity lending methodology and Trust (KWFT), a microfinance lender 51 percent female clients use individual dedicated to women. Initially, KWFT lending from MFIs. relied on limited donor funds and loans By December 2007, the Campaign from commercial banks. Now it has counted 3,552 MFIs were reaching more become the largest microfinance institution than 154 million clients with ongoing loans. for women in East and Central Africa. In Out of these, 106 million beneficiaries were 2006 alone, KWFT disbursed $52 million among the poorest and 83.4 percent (88.7 in loans to its clients, managed $16 million million) were women. in member savings and had more than According to the Microcredit Summit 200,000 accounts in seven of Kenya’s eight Ritu Srivastava Campaign Report 2007, of the 3,316 provinces. KWFT also provides medical microfinance institutions that were insurance programme for its clients and June 2009 | 29
  • 29. Regional Breakdown of Microfinance Data Region Number of Number of Number of Number of Number of Number of Number of programmes total clients total clients poorest clients poorest clients poorest women poorest women reporting in 2005 in 2006 in 2005 in 2006 clients in 2005 clients in 2006 Sub-Saharan 970 7429730 8411416 5380680 6182812 3422825 4036017 Africa 1677 96689252 112714909 74330516 83755659 63934812 72934477 Asia and the Pacific 579 4409093 6755569 1760405 1978145 1258668 1384338 Latin America & Caribbean 30 1287318 1722274 387951 755682 321004 621111 Middle East & North Africa 81859552 92672298 68937309 78975943 3256 109815393 129604168 Developing World Totals 39 55707 54466 13318 25265 7862 11765 North America & Western Europe 21 3390290 3372280 76166 225011 47856 142873 Eastern Europe and Central Asia 60 3445997 3426746 89484 250276 55718 154638 Industrialised World Totals 3316 113261390 133030913 81949036 92922574 68993027 79130581 Global Totals Source:: Microcredit Summit Campaign Report 2007 their families. For a yearly payment of about $60, KWFT On the other hand, TCP strictly targets women who live below clients get policies to cover inpatient, personal accident and the poverty line. Both of SEF’s operations, MCP and TCP, utilise funeral expenses. a methodology that has been adapted from that of the Grameen Bank of Bangladesh. As of December 2007, MCP had 15,677 Pankop Women Farmers Forum active clients whereas TCP had served 30,063 clients. A vast The Pankop Women Farmers Forum reflects the new face of majority of their clients have been women. Typical enterprises microfinance in Africa. Pilda Modjadji, founder of the Pankop include hawkers of fruits and vegetables and new or used clothing, Women Farmers Forum, started out with the goal of growing fruits small convenience shops, and dressmakers. On average, each collectively and using the proceeds to supplement family diet, raise business employs 1.4 individuals, including the owner, on a incomes and pay school tuition fees,. Today they are a group of full-time or part-time basis. By the end of March 2008, the 300 members who are determined to create an alternative source programme had served 47,560 self-employed clients with a of employment in the village. The women, with agreement and principal outstanding of 57 million Rands. Since inception, SEF support of traditional chiefs and municipal authorities, set up a has disbursed 437,064 loans for self-employment, to the value of fruit and vegetable dehydration plant. The group got the funds 572 million Rands. from local commercial banks because Thembani International Guarantee Fund, a South African organisation created in 1996 Asia and the Pacific by the US non-profit Shared Interest and the Swiss-based The microfinance structure in Asia varies significantly across the Recherchés et Applications de Financements Alternatifs au countries, depending on the stage of financial development; the Développement (RAFAD), put up $70,000 in loan guarantees. financial development and the economical development and the With these funds, the women plan to meet European Union policy development. The International Finance Corporation (IFC) health and safety standards and start exporting their produce. 2007 report states that the demand of financial services among poor people is extensive in Asia. The microfinance movement in Asia is Small Enterprise Foundation (SEF; more focused on women; 98% of borrowers were women in Asia in Founded in 1992, SEF is a not-for-profit, pro-poor microfinance 2006, as compared to 66% in Africa and 61.8% in Latin America. institution based in the Limpopo province of South Africa. It manages some of the lowest average loan balance worldwide, SEF aims to work towards the elimination of poverty and with a stronger social focus on the poor, presenting lower loan unemployment. This is accomplished through two programmes, average values than in other regions; USD 151 in Asia in 2006, the Microcredit Programme (MCP) and the Tšhomišano Credit USD 183 in Africa and USD 671 in Latin America. Grameen Programme (TCP). MCP focuses on existing, but generally Bank in Bangladesh, Friends of Women’s World Banking, India marginal micro-enterprises and provides them with microloans. (FWWB-I) and Sadhan in India, Tianjin Women’s i4d | June 2009 30
  • 30. Federation in China are some of the major MFIs initiated by Pro - Mujer ( women entrepreneurs. Pro Mujer is an international microfinance and women’s development network, who’s mission is to provide Latin America’s Friends of Women’s World Banking, India (FWWB-I; http:// poorest women with the means to build livelihoods for themselves and futures for their families through microfinance, business In 1982, Friends of Women’s World Banking, India (FWWB-I) training, and healthcare support. The network also links women was created as one of the first few affiliates of Women’s World and their families with existing resources and services in their Banking. For the first seven years of its operations from 1982 to communities. The group has its network in Argentina, Bolivia, 1989, WWB’s activities were limited to providing loan guarantees Peru, Mexico and Nicaragua. In 2007, the group provided credit, for poor women in the state of Gujarat. After modifying the healthcare and business training to 193,000 Latin American byelaws in 1989, FWWB expanded its financial services for poor women and offered healthcare to approximately 965,000 children women beyond the state of Gujarat. The scope of its activities in and extended family members. Pro Mujer also organises women microfinance, as well as its geographical coverage, increased to into community banks of 20 to 30 women each who can apply 91 organisations in 12 states as on March 2006. FWWB India for loans as a group, disburse the money to members, and collect has adopted a ‘Credit Plus’ approach and its current activities loan payments and savings deposits.The group offers a range of include two broad programme areas. FWWB India has a Revolving loan products to meet the needs of poor women entrepreneurs. Loan Fund, which serves to refinance partner organisations that The most common are working capital loans, which range from provide financial services to the poor. FWWB India also supports US$50 to US$1,500 with a repayment term of four to six months. these partner organisations through the provision of institutional Loans start small, US$50 to $100, and those women who repay the development programmes to expand their capacity to manage loan on time qualify for larger loans. Pro Mujer recently developed credit and savings activities. In addition to the above, FWWB has the Star Product (Producto Estrella) in Mexico, which gives larger also been involved in micro insurance, supporting innovations in loans to longtime Pro Mujer borrowers, enabling them to scale microfinance, etc. up their businesses more effectively. Tianjin Women’s Federation ( La Fundación Boliviana para el Desarollo de la Mujer aboutus) (FUNBODEM; The Tianjin Women’s Business Incubator (TWBI), a non-profit FUNBODEM is an affiliate of Women’s World Banking and business incubator located in Tianjin, China, is dedicated to a member of the unregulated MFI association, FINRURAL. promoting the growth and development of women-owned FUNBODEM is a non-governmental, non-profit organisation businesses of all types in Tianjin. While there are over 400 business that was founded on July 15, 1987 - an initiative of a group of incubators in China, TWBI is the only one which is focused women willing to support the provision of financial services to on employment creation and empowerment of a disadvantaged help the low-income women of Bolivia come out of poverty. community. The core mission of the centre is to provide long- The foundation’s objective is to improve the earning capacity of term sustainable opportunity of employment for women. TWBI women and to enhance their role in society. FUNBODEM only believes that the best way to help women entrepreneurs and loans to women, and they require all clients to put their savings women employees to have good opportunity of employment is into guaranteed deposits. to provide assistance and help women enterprises that are in the infancy and development stage. In Tianjin, more than 50 laid-off Conclusion women have carved out their own businesses with the centre’s help. Realising the fact that a high percentage of women are among the Recently, the centre received a donation of USD 200,000 from the poorest of the poor. Microfinance could be one of the solutions to World Bank to equip the centre with information communication help them expand their horizon and offer them social recognition technology (ICT) tools. and empowerment. The question is not whether we should focus on women or men. Both play a vital role in generating income Latin America and the Caribbeans and managing the social economy. Their capacity for innovation By the end of the financial year 2005, microfinance in Latin stimulates general economic growth. Microfinance programmes America including the Caribbeans maintained its steady pace both should be accessible to both genders and offer adequate access to in terms of scale and outreach while MFIs kept their commitment financial services, training and technical assistance. Short-term to serve the lowest income sectors. In 2004 and 2005, the outreach assistance programmes like providing credit, technology and of microfinance institutions were increased by 20 percent of total skills enhancement training programmes, etc., will increase the and 5.2 million borrowers with loan worth approximately US$ productivity of women’s labour. 5 billion. According to the Microfinance Information Exchange, Which will, in turn, increase their longterm productivity and Inc.’s (MIX) report ‘Benchmarking Latin American Microfinance access to productive resources, creating social, technological and 2005’, 40 percent of women are actively participating in economical mechanisms to reduce conflicts between women’s microfinnace activities. In 2007, 34% Latin Americans were poor productive and reproductive roles. An ideal microfinance and 13% lived in extreme poverty. Pro mujer and FUNBODEM programme should consider women in a broader context, as (La Fundación Boliviana para el Desarrollo de la Mujer) are two the nucleus of a family, that is vital for societal improvement major MFIs working for women empowerment. and progess. June 2009 | 31
  • 31. ZERO MASS FOUNDATION Development initiatives ZERO Microfinance and Savings Support Foundation (ZERO The ZERO platform is based on new generation mobile MASS Foundation/ZMF) has been a pioneer in the field of phones and Fingerprint authentication which converts new Financial Inclusion space as a Business Correspondent (BC) to generation low-cost NFC (Near Field Communication) mobile 25 Banks in India including the State Bank of India (SBI). ZMF phones with large storage capacities as a secure, self-sufficient helps banks increase their outreach in ‘Rural Unbanked India’ bank branch, with biometrics based customer ID, for customer through its Customer Service Points (CSPs) working as village enrollments for no-frills accounts and all types of transactions in branches using the Branchless Banking technology. A.Little.World the village with the local Customer Service Point operator acting Pvt. Ltd. (ALW) is the technology provider for all the banks who as a Teller. Existing Mobile communications networks are used have engaged ZMF as a BC. ALW provides the technology as a for all transaction uploads, downloads and application updates. service to Banks under its brand “ZERO”. The platform ensures that Banking facility is provided to the ZMF creates the last mile operations network in villages, right people at the right time and the right amount of money is under pre-defined service agreements with Banks and front-ends transacted. The CSPs are equipped with a mobile phone and a the delivery of full-featured transactional services on behalf of Fingerprint Scanner cum Receipt Printer to carry out Banking Banks for Financial Inclusion on the ground. ZMF, a Section and Payment transactions (i.e. Cash Deposit, Cash Withdrawal, 25 Company closely affiliated to ALW provides field operations Account to Account Transfer, Balance Enquiry, Mini Statements, for the ZERO platform. ZMF manages the field force, account etc.) using both online connectivity to Banks and in an offline creation, appointment of Customer Service Points (CSPs), mode (with daily batch settlements). The main features of the management of cash and other logistics at the last mile. ZMF ZERO platform are: in turn collaborates with strongly placed local organisations, • Mobile phone as core Bank branch district and state administration to ensure smooth deployment • Smart cards not needed for biometric authentication in local and operations. service area As per a typical agreement between ZMF and a bank, ZMF’s • Mobile phone used for opening accounts on-the-spot by scope of services include: local CSP • Enrolment of customers for no-frills zero-balance savings • Voice prompts during enrolment and transactions accounts and other account types that may be specified by • Printout of each transaction the Bank. The platform employs biometrics based ID, RFID smart cards, • Enrolling, training and equipping of Customer Service Points and NFC (Near Field Communication) mobile phones as (CSPs) in villages to provide various kinds of transaction acceptance and enabling devices (with merchants, field forces of services including but not limited to cash deposit, cash MFIs and as cashless ATMs). withdrawal, transfer of money, payment of utility bills, The ZERO platform can be easily deployed for the following disbursal of loans, collection of loan instalments, and cashless services: payments at local and remote merchant establishments. • Biometric Identity • Engaging the CSPs to provide enrolment services for opening • Cash deposit no-frills account • Cash withdrawals • Engaging the CSPs to provide various kinds of transaction • Money transfer services including but not limited to cash deposit, cash • NREGA / Pensions withdrawal, transfer of money, payment of utility bills, and • Micro Credit disbursal of loans and collection of loan installments. • Micro Insurance • 3rd party cash collection • Cashless Payment • Cashless payments at local and remote merchant • Utility Payments establishments. • SHG Utilities like Disbursals, Repayment and Record of • Management of cash Attendance • Lending activities on behalf of the Bank (as an MFI) Other As evident from the platform’s applications, ZERO MASS service as may be advised by the Bank in writing to ZMF, Foundation (ZMF) also works closely with Government and which ZMF agrees to perform Departments to ensure that the exact amounts of Government i4d | June 2009 32
  • 32. benefits reach in time to the rightful B. The CSP in a village can enroll beneficiaries for Government customers using the same mobile device programmes like NREGA (National that is used for carrying out transactions Rural Employment Guarantee Act), with an easy to use graphical interface Social Security Pensions (SSP), C. Use of both online and offline Scholarships, Housing Grants, etc. methods of transactions Bank accounts are opened for all such Government beneficiaries by ZMF. ZMF has expanded its operations in ZMF also helps Government 19 states with more than 8,000 CSPs departments to automate processes covering more than 16,000 villages. such as Attendance and Job Demand About 4 million customers have been for NREGA using the beneficiary enrolled under the Financial Inclusion fingerprint authentication and programme. Multiple State Governments by ascertaining the GPS (Global are disbursing their NREGA wages and Positioning System) co-ordinates of Social Security Pensions using the the work sites. ZERO system at the CSPs of ZMF. ZERO Platform has been built as ZMF actively works towards improving a cost effective method for Banks to commercial viability of CSPs by offering extend all their products and services multiple products and services through such as Savings, Loans, Recurring the ZERO platform. Deposits, etc., to customers. The A major hurdle in scaling up of the platform is also built as an easy to use option of illiterate and operations is to find the right business model for commercial semi-literate population in villages with features like Graphical viability of all stakeholders in the ecosystem, e.g. Customer Service User Interface and Voice Guidance. Point (CSP) operators, Banks and ZMF. ZMF is constantly ALW and ZMF have done many innovations to bring down working with all the partner institutions to arrive at the right cost of operations for banks as well as for rapid scale up of commercial models in all specific geographies of India. operations. Few examples of such innovations are: Lokanath Panda A. ZERO platform can be used by customers without using Co-Founder and Director, expensive Smartcards ZERO MASS Foundation and A.Little.World Pvt. Ltd. FTK Technologies implements vernacular interface in government schools FTK Technologies co-branded product, Magikeys, indicates the direct influence on learning across the board. developed with FTK’s LooKeys software, is changing the face of “Even teachers of subjects such as physics and science are excited computing in government schools. The software, co-developed now to use aids such as power point presentations, which could with the computer education vertical, Educomp Solutions, not used so far, as teachers were restricted to English in almost is specifically oriented to the needs of Indian Government every aspect when working with computers” Palgi explains. “As schools, allowing both Students and Teachers all across India to this was part of our vision when creating Magikeys, it gives us enjoy computing experience in their mother tongues through immense pleasure to see how we are helping to create a new an intuitive and easy-to learn interface, using the technology generation of young computer users, using computers in their of FTK’s flag ship product- LooKeys. own mother tongue. Our commitment is, and will always “We took into consideration the fact that most government remain, to help bring the computing experience to the entire schools aspire to introduce their students to the world of people of India. MagiKeys, which was specifically created for computers, but face obstacles due to language barrier and the the next generation of users, is maybe the most important step familiarity and preference of the students with their mother towards achieving that goal.” tongue” said Rafi Palgi, FTK Executive Manager “Based on One emphasis that was implemented in Magikeys was a the expertise and experience of our partners in Educomp, fully functional Offline interface that would enable teachers we created a special interface that will function similarly as and students to use MS-OFFICE and other Unicode our comprehensive software, LooKeys, and that will enable compliant applications in their own languages. In schools that computer-aided teaching and learning in Indian languages. enjoy internet connectivity students can also write mails, chat Educomp, as the market leaders in computer education, along and surf the net in their own language using MagiKeys. with their devotion and passion to this cause, are the most The product is used by Government Schools across the qualified partner to take this revolution and implement it in the nation, and has proven to be a priceless tool for the next field.” Feedback received from the schools using the software generation of computer education. June 2009 | 33
  • 33. BEST MICROFINANCE INSTITUTIONS Forbes magazine’s top 50 MFIs The first-ever list of the World’s Top 50 Microfinance Institutions selected by Forbes were chosen from a field of 641 micro-credit providers in the year 2007. This list was prepared by Microfinance Information Exchange ( To qualify, the institutions must have made available their audited financials and must have passed a review by a Forbes panel of advisors. The table gives the rank (out of 641) for the top institutions according to scale, which is based on the size of their gross loan portfolio; efficiency, which considers operating expense and the cost per borrower as a percent of the gross national income per capita of their country of operation; risk, which looks at the quality of their loan portfolios, measured as the percent of the portfolio at risk greater than 30 days; and return, which is measured as a combination of return on equity and return on assets. Each category is equally weighted for an institution’s overall ranking Rank Name of MFI Country Scale Efficiency Risk Returns 1 ASA Bangladesh 14 83 56 40 2 Bandhan India 108 49 42 1 3 Banco do Nordeste Brazil 46 27 213 25 4 Fundación Mundial de la Mujer Colombia 58 72 193 1 Bucaramanga 5 FONDEP Micro-Credit Morocco 119 26 196 1 6 Amhara Credit and Savings Institution Ethiopia 56 126 118 42 7 Banco Compartamos, S.A., Institución Mexico 15 24 295 11 de Banca Múltiple 8 Association Al Amana for the Promotion Morocco 17 212 133 1 of Micro-Enterprises Morocco 9 Fundación Mundo Mujer Popayán Colombia 53 181 141 1 10 Fundación WWB Colombia - Cali Colombia 27 206 155 4 11 Consumer Credit Union ‘Economic Russia 82 300 19 1 Partnership’ 12 Fondation Banque Populaire pour le Morocco 59 126 219 1 Micro-Credit 13 Microcredit Foundation of India India 75 142 7 185 14 EKI Bosnia and 102 242 1 66 Herzegovina 15 Saadhana Microfin Society India 263 79 73 1 16 Jagorani Chakra Foundation Bangladesh 136 176 128 1 i4d | June 2009 34
  • 34. Rank Name of MFI Country Scale Efficiency Risk Returns 17 Grameen Bank Bangladesh 8 280 100 62 18 Partner Bosnia and Herzegovina 64 169 230 1 19 Grameen Koota India 209 106 156 1 20 Caja Municipal de Ahorro y Crédito de Peru 48 99 222 119 Cusco 21 Bangladesh Rural Advancement Bangladesh 10 159 126 205 Committee 22 AgroInvest Serbia 84 195 222 1 23 Caja Municipal de Ahorro y Crédito de Peru 20 163 220 101 Trujillo 23 Sharada’s Women’s Association India 229 207 55 13 for Weaker Section 24 MIKROFIN Banja Luka Bosnia and Herzegovina 60 240 205 1 25 Khan Bank (Agricultural Bank of Mongolia 19 149 280 59 Mongolia LLP) 26 INECO Bank Armenia 96 173 202 39 27 Fondation Zakoura Morocco 51 268 194 1 28 Dakahlya Businessmen’s Association for Egypt 200 215 102 1 Community Development 29 Asmitha Microfin Limited India 80 254 73 111 30 Credi Fe Desarrollo Microempresarial S.A. Ecuador 28 252 206 34 31 Dedebit Credit and Savings Institution Ethiopia 50 246 80 154 32 MI-BOSPO Tuzla Bosnia and Herzegovina 128 120 283 1 33 Fundacion Para La Promocion y el Nicaragua 173 89 171 100 Desarrollo 34 Kashf Foundation Pakistan 123 194 219 1 35 Shakti Foundation for Disadvantaged Bangladesh 170 221 151 1 Women 36 enda inter-arabe Tunisia 198 90 257 1 37 Kazakhstan Loan Fund Kazakhstan 120 118 320 1 38 Integrated Development Foundation Bangladesh 300 134 140 1 39 Microcredit Organisation Sunrise Bosnia and Herzegovina 114 103 341 17 40 FINCA-ECU Ecuador 125 138 264 54 41 Caja Municipal de Ahorro y Crédito de Peru 23 126 220 215 Arequipa 42 Crédito con Educación Rural Bolivia 135 152 298 1 43 BESA Fund Albania 109 135 345 1 44 SKS Microfinance Private Limited India 61 395 141 1 45 Development and Employment Fund Jordan 83 388 135 1 46 Programas para la Mujer – Peru Peru 292 82 242 1 47 Kreditimi Rural i Kosoves LLC (formerly Kosovo 213 158 247 1 Rural Finance Project of Kosovo) 48 BURO, formerly BURO Tangail Bangladesh 137 207 186 91 49 Opportunity Bank A.D. Podgorica Serbia 49 234 319 23 50 Sanasa Development Bank Sri Lanka 86 206 93 241 Source: Forbes Magazine ( June 2009 | 35
  • 35. 5th ns tio m ina 15 no rom ds ne f r AWARDS nli egin nwa O b Ju neo 25 - 27 August 2009 Hyderabad International Convention Centre, India Celebrating Innovative Initiatives and Exemplary Work in ICT! eINDIA 2008 Award Winners with former Minister of Panchayati Raj and DONER, Shri Mani Shankar Aiyar, former Member of Parliament, Shri Suresh Prabhu, Secretary, DIT, Ministry of Communications and IT, Shri R Chandrashekhar and Joint Secretary, Department of School Education and Literacy, Ministry of HRD, Shri Subhash C Khuntia Award Categories for Nominations in e-Governance Award Categories for Nominations in Digital Learning • Government to Citizens Initiative of the Year • ICT Enabled School of the Year • Government to Business Initiative of the Year • ICT Enabled University of the Year • Government to Government Initiative of the Year • Government/ Policy Initiative of the year • m--Governance Initiative of the Year • Civil Society/ Development Agency Initiative of the Year • Civil Society/ Development Agency Initiative of the Year Award Categories for Nominations in Telecentre Award Categories for Nominations in e-Health • Innovative Grassroots Telecentre of the Year • Government/ Policy Initiative of the Year • ICT Enabled Hospital of the Year • Civil Society/ Development Agency Initiative of the Year • Government/ Policy Initiative of the Year • Civil Society/ Development Agency Initiative of the Year Award Categories for Nominations in e-Agriculture Award Categories for Nominations in MunicipalIT • ICT Enabled Agricultural Initiative of the Year • Government/ Policy Initiative of the Year • ICT enabled Municipal Initiative of the Year • Civil Society/ Development Agency Initiative of the Year For detailed information on eINDIA 2009 Awards, visit us at Gautam Navin (+91-9818125257),, Debabrata Ray (+91-9899650692), Online Nominations at:
  • 36. REGISTRATION FORM 5th India's Largest ICT Event 25 - 27 August 2009 DELEGATE Hyderabad International Convention Centre, India Personal details First Name ........................................................................................................................................... Designation/Profession ........................................................................................................................ Organisation ....................................................................................................................................... Address .............................................................................................................................................. City .............................................................. Postal Code ................................................................... State ............................................................ Country ......................................................................... Tel (O) .......................................................... (R) ................................................................................. REGISTER NOW Mobile ......................................................... Fax ................................................................................ Online Website........................................................ Email ............................................................................. Sector: Govt. NGO Corporate Academics/Indstitutions Email My primary interest area is: egov India Digital Learning India Indian Telecentre Forum eHealth India eAgriculture India Fax I am also interested in: +91-120-2500060 egov India Digital Learning India Indian Telecentre Forum eHealth India eAgriculture India I would like to receive Newsletter on: egov DL i4d eHealth ORGANISERS Payment mode: Demand Draft Cheque Wire Transfer Payment Details: Cheque/Demand Draft No. ................... or Transaction ID ...................................... Dated .............. Drawn on .............................. for amount INR/USD ................................. in favour of CSDMS, payable at New Delhi. knowledge for change CO-ORGANISER DELEGATE REGISTRATION FEES DETAILS Indian Delegates: Pre Registration: INR 8000 Spot Registration: INR 11000 Foreign Delegates: Pre Registration: USD 325 Spot Registration: USD 375 Department of Information Technology *Registration fees includes taxes as applicable Ministry of Communications & IT Government of India Foreign Remitter should approach their banker as per the wire transfer details below: GOVERNMENT PARTNER Beneficiary name: CSDMS Bank name and address: Citibank Noida Branch, India, A-6 Sector - 4, Noida, UP, India, Account number: 5-000890-288, Swift code: CITIINBXAXXX Fee Entitlements The Delegate Registration entitles the individual to participate in all technical sessions, workshops, keynotes and plenary sessions and social functions for all four/any: egov India 2009, Digital Learning India 2009, Indian Telecentre Forum 2009, eHealth India 2009 conferences. For Cancellation and Substitution Policy please refer to *Photocopies of form are also acceptable eINDIA 2009 Secretariat Centre for Science, Development and Media Studies, G-4, Sector - 39, NOIDA-201 301, India Tel: +91-120-2502180 to 85 Fax: +91-120-2500060 Web: E-mail:
  • 37. India News Nasscom wants to partner govt for ‘inclusive’ growth The apex body representing the Indian Technology (IT) industry, the National Association of Software and Service Companies (NASSCOM) stated that it would like to work with the government to bring about an inclusive (which benefits all sections of society) economic growth agenda. NASSCOM President, Som Mittal stated that the industry and the Information for development government would have to join hands to accelerate IT adoption in the government sector. The IT-BPO industry has the potential to transform the country and play a major role in the development of India’s key sectors, including education, healthcare, infrastructure, citizen services and financial inclusion, thereby creating significant employment opportunities across India, with a consequential impact on economic growth. NASSCOM and the Samsung launches industry look forward to working closely with the government on this key agenda. The solar-powered phone software body has also urged the government to extend availability of benefits under Sections Samsung launched a low-cost solar-powered 10A/10B for units in the Software Technology Parks of India (STPI) and Export Oriented mobile phone. The new handset, launched Units (EOU) to mitigate the impact of the recession and protectionist measures being under its low-cost line of products Guru adopted globally. Another area of concern for the IT companies is the duplicity of indirect at a price of Rs 2,799, has a solar panel on taxes for packaged software and policies for service tax refunds. Nasscom has requested the the back, which can be used to charge the government to develop a uniform approach on transfer pricing and amend Fringe Benefit battery anywhere the sun is shining. Tax (FBT) on employee stock options or ESOPs. The phone, christened the Guru E1107, can provide around 5-10 minutes of talktime with one hour of solar charging earth at different points. These sensors its partners, are able to withstand severe when the handset is turned off and sunlight will be attached to a wireless transmission droughts, tolerate higher temperatures and has adequate intensity. According to the device, which will convert analog value mature early, enabling farmers to be ready Country Head, Samsung India, solar into digital value and send the inputs to to meet the challenges of climate change charging will give enough time to make few the base stations, which will be connected by cultivating the improved crops. important calls when there is no electricity. to Amrita mutt’s Kollam campus. Experts According to William Dar, Director The battery will attain full power with will be monitoring the inputs from the General of ICRISAT, the current research about 40 hours of solar charging. base stations in real time and any unusual strategy at the Institute is to improve the The handset, will be in shops by the behaviour or extreme value will trigger heat-tolerance and drought-resistance end of this month. The company is also an alarm. qualities of ICRISAT’s mandate crops. planning to introduce in India its solar- The fully tested model has become ICRISAT’s research is focused on crops powered touchscreen mobile handset, Blue operational in Munnar, Kerala. The such as pearl millet, sorghum, chickpea, Earth - unveiled at the GSMA Mobile system can be deployed in any part of pigeonpea and groundnut which are World Congress in Barcelona, Spain early the country prone to landslides and snow important for the livelihood of the people this year. avalanches. Besides, the application could in the dryland areas. be put to industrial use for study of gas These crops have several natural University develops wireless leakages or in conservation of forests evolutionary advantages for the global tech to detect landslides by early identification of forest fires warming scenarios. Both pearl millet Students of Amrita Vishwa Vidyapeetham during summer. As part of this project, and sorghum have high levels of salinity University have developed a wireless representatives from various European tolerance, and hence are better adapted network system for landslide detection, in partners like University of Rome, Selex to areas that are becoming saline due to collaboration with European Commission Communications, Intracom Telecom, global warming. and Indian Space Research Organisation Czech Centre for Science and Technology Some of the pearl millet varieties and (ISRO). The technological breakthrough have arrived at the Amrita University to hybrids developed are able to flower and system was developed as part of the research learn about the first-ever wireless sensor set seeds at temperatures of more than 42 project called, Wireless Sensor Network network system for landslide detection. degrees centigrade, in areas such as Western with Self-Organisation Capabilities for Rajasthan and Gujarat in India. Improved Critical and Emergency applications ICRISAT develops climate sorghum lines have also been developed (WINSOC). Wireless panels with sensor change-ready varieties that are capable of producing good yields nodes to read different parameters of the Improved crop varieties developed by the in temperatures of 42 degrees C, and have soil, like moisture, vibration and movement International Crops Research Institute for stay-green traits that can enhance terminal will be embedded 15 metres beneath the the Semi-Arid Tropics (ICRISAT), and drought tolerance. 38 i4d | June 2009
  • 38. World News NASA to grant $8 million for climate change education NASA announced that it will grant $8 million to fund educational projects on global climate change. NASA aims to enhance students’ academic experiences and improve educators’ abilities to engage and stimulate their pupils in this field. The federal agency seeks proposals for students of elementary, secondary, undergraduate and lifelong teaching and learning. Information for development The funding opportunity supports NASA’s goal to engage students in the critical disciplines of science, technology, engineering and mathematics. NASA called for projects that improve teacher competency for global climate change education; strengthen teaching and learning about climate change using NASA Earth system data and models; and enable global climate change science research experiences for undergraduate or community ITU establishes new college students and pre- or in-service teachers, including those in non-traditional teacher study group to deal with licensure programmes. climate change International Telecommunication Union (ITU) has established a Focus Group World Bank commits US$50 ties, which have been developed based on on ICTs and Climate Change and will million for ICT in Nigeria the progress made through the e-Govern- formalise the Focus Group’s output as The World Bank has agreed to commit nance initiative so far. The first strategic ITU-T Recommendations including a US$50 million on ICT infrastructure priority focuses upon the development methodology for evaluating the effects development, connectivity, skills develop- of capabilities and capacity. Civil servants of ICTs on climate change both in direct ment and capacity building in Nigeria. will be trained with the relevant ICT skills terms and how ICTs can reduce emission With the help of this investment, the to successfully implement e-government in other industry sectors. Study Group 5 World Bank is hoping to achieve significant projects. Strategic Priority Two (SP2) will was chosen as the lead study group and transformation in the region. focus on enhancing e-Governance through will be renamed the Study Group on With the World Bank funding the reviewing, revising and developing policies Environment and Climate Change to country will further consolidate its position and guidelines to allow for the effective reflect its new mandate. SG 5 remains the as the hub of ICT development and the delivery of e-Government projects. Under lead Study Group for protection against largest ICT market in Africa, which would this strategic priority, the legal framework electromagnetic effects. Specifically SG 5 attract investment by international telecom will be updated to suit the e-Government will work on documents related to: companies. The key intervention in Ni- initiative. Security and Trust in e-Gover- 1. Study of methodologies for calculat- geria includes connectivity, infrastructure nance will be the focus of SP3, as the neces- ing the amount of greenhouse gases development and the outsourcing sector. sary infrastructure will be put in place to (GHG) emissions from ICTs, and The bank has to date committed hundreds ensure that electronic transactions and ex- the amount of reduction in the GHG of millions of dollars for the development change of information is kept confidential emissions in other sectors as a result of ICT throughout Africa. and is conducted in a secure manner. ICT of using ICTs. awareness programmes will be introduced 2. Creation of a framework for energy Brunei’s strategic plan to to educate all parties of the prevalent ‘cyber efficiency in the ICT field, taking ac- achieve e-Governance risks’ and the precautions that ought to be count of WTSA Resolution 73. Brunei has moved a step closer towards taken to minimise these threats. 3. Study of methodologies for power achieving e-governance with the launch Strategic Priority Four aims to integrate feeding that effectively reduce power of a strategic plan that will map the way the ministries under a common network, consumption and resource usage. to realising the initiative over the next five where government agencies will be able to 4. Study of methodologies that reduce years. The plan encompasses strategies such work together more effectively. ICT tools environmental effects for ICT facilities as increasing human capacity in IICTs, and resources will also be standardised to and equipment such as recycling. research and development of optimising ensure efficient and cost-effective use of Essentially, the group will aim to see online services tailored specifically for these resources. These criteria fall under that standards are developed in the most the public and improving connectivity the ambition of the realisation of a ‘one appropriate way and that no duplication of between ministries. government’ network. effort occurs. It will also provide a single Dubbed the e-Government Strategic Lastly, Strategic Priority Five calls for a point of contact for ICT and Climate Plan 2009-2014, it addresses the needs of more convenient and efficient approach to Change activities in ITU-T and seek col- the three main stakeholders, namely the online government services for the public. laboration from external bodies working citizen, industry and government. The Wherever applicable, the public will have in the field. plan is based on five key strategic priori- 24-hour access to these e-services. June 2009 | 39
  • 39. FAO-GTZ MICROBANKING SYSTEM FOR WINDOWS (MBWIN) Technology for microfinancing The FAO-GTZ MicroBanking System is a software that is common functions. aimed at managing a financial organisation’s client transactions An inbuilt report in a comprehensive manner, maintaining it’s general ledger, and generator allows at monitoring all operations. users to custom- The system is the product of collaboration between the build reports to meet Food and Agriculture Organisation of the United Nations their requirements. ( and Deutsche Gesellschaft für Technische The report Zusammenarbeit (GTZ) GmbH ( generator has been The FAO-GTZ designed to meet the MicroBanking Customer Information File Screen basic internal and System for Windows external reporting (MBWin) is the requirements of most financial organisations. A product generator successor of the allows the user to older DOS-based setup and specify FAO MicroBanking products without System. The system the need of re- has been designed programming and developed for MBWin’s source a wide range of code. Loans Screen banks and financial For users who intermediaries. With are looking forward an eye on the varying needs of its prospective users, the software to migrating from has been designed on a multi-tier architecture, which is scaleable the older version and can be adapted to a variety of hardware configurations. It is of this software, Batch Data Entry Screen modular in terms of applications and functionality. M BW i n h a s a Carrying over features from the earlier version of the software, number of utilities which help with the migration of data, MBWin has modules for translation of the system into new current accounts, savings languages apart from assistance with accounts, time deposits, the conversion of work from manual share accounts and loan operation. accounts that interface with The in-built MIS System allows the general ledger module the user to consolidate and merge (GL) and the contact branch level MBWin databases at the information module (CIF). head office of the institution where the The centralised CIF module system has been deployed. All reports maintains comprehensive can be exported in many formats information on corporate including MS Excel spreadsheets. and individual customers, The full version of MBWin costs guarantors and signatories, US$1500 for a single user and US$2000 and it has additional features for the first ten concurrent users. for specialised microfinance MBWin Light (preconfigured for System Configurator Screen operators that deploy group a single user) is also available for methodologies. US$500. MBWin offers a classic user-friendly menu structure as A fully functional demo version of the software can be well as a set of speed buttons for quick access to the most downloaded for free from their website. i4d | June 2009 40
  • 40. NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT (NABARD), INDIA Banking for All The National Bank for Agriculture and Rural Development NABARD was established by an act of the Indian Parliament (NABARD) was set up as an apex Development Bank with on 12 July 1982 to implement the National Bank for Agriculture a mandate for facilitating credit flow for the promotion and and Rural Development Act 1981. It replaced the Agricultural development of agriculture, small-scale industries, cottage and Credit Department (ACD) and Rural Planning and Credit Cell village industries, handicrafts and other rural crafts. It is also (RPCC) of Reserve Bank of India, and Agricultural Refinance mandated to support all other allied economic activities in rural and Development Corporation (ARDC). areas, to promote integrated and sustainalbe rural development Some of the major activities of the bank since it’s inception and secure prosperity of rural areas. are as follows: In order to facilitate rural prosperity, NABARD: • Preparing of Potential Linked Credit Plans for identification • Provides refinance to lending institutions working in rural of exploitable potentials under agriculture and other activities areas available for development through bank credit. • Brings about and promotes institutional development • Refinancing banks for extending loans for investment and • Evaluates, monitors and inspects the client banks and lending production purpose in rural areas. institutions • Providing loans to State Government/NGOs/Panchayati Raj Apart from these functions, NABARD also acts as a co- Institutions (PRIs) for developing rural infrastructure. ordinator in the operations of rural credit institutions, assists the • Supporting credit innovations of NGOs and other non- government, the Reserve Bank of India and other organisations formal agencies. in matters pertaining to rural development, offers training and • Extending formal banking services to the unreached rural research facilities to banks, co-operatives, and organisations poor by evolving a supplementary credit delivery strategy working in the realm of rural development and helps the state in a cost effective manner by promoting Self Help Groups governments in achieving their targets of providing assistance to (SHGs). institutions in agriculture and rural development. • Promoting participatory watershed development for NABARD also acts as a regulator for co-operative banks and enhancing productivity and profitability of rainfed agriculture Regional Rural Banks (RRBs). in a sustainable manner. • On-site inspection of cooperative banks and RRBs and off- site surveillance over health of cooperatives and RRBs. Some milestones NABARD and microfinance 1. Refinance disbursement under ST-Agri & Others and MT- Headquartered in Mumbai, India, the Bank conducted a series of Conversion/ Liquidity support aggregated INR 16952.83 crore research studies in association with MYRADA (a leading NGO during 2007-08. from South India) and independently during the early eighties. 2. Refinance disbursement under Investment Credit to commercial banks, state cooperative banks, state cooperative agriculture These studies showed that despite having a wide network of rural and rural development banks, RRBs and other eligible financial bank branches implementing poverty alleviation programmes and institutions during 2007-08 aggregated INR 9,046.27 crore. self-employment opportunities through bank credits for almost 3. Through the Rural Infrastructure Development Fund (RIDF) two decades, a very large number of the poorest of the poor Rs.8034.93 crores were disbursed during 2007-08. With this, a continued to remain outside the formal banking sector. These cumulative amount of INR 74,073.41 crore has been sanctioned studies indicated that the existing banking policies, systems, for 2,80,227 projects as on 31 March 2008 covering irrigation, procedures and financial products were not well suited to meet rural roads and bridges, health and education, soil conservation, the needs of the poor. It appeared that what the poor needed was drinking water schemes, flood protection, forest management etc. better access to these products and services and not just cheap, 4. Under Watershed Development Fund with a corpus of INR 613.71 subsidised credit. crore as on 31 March 2008, 416 projects in 94 districts of 14 states After these studies, a need was felt for alternative policies, have benefited. 5. Farmers now enjoy hassle free access to credit and security through systems and procedures, savings and loan instruments and new 714.68 lakh Kisan Credit Cards that have been issued through a service delivery mechanisms that would fulfill the requirements vast rural banking network. of the target group especially the women. Therefore, the emphasis 6. Under the Farmers’ Club Programme, a total of 28,226 clubs was on improving access to microfinance instead of just micro- covering 61,789 villages in 555 districts have been formed, helping credit. To this end, NABARD considers the launch of its pilot farmers get access to credit, technology and extension services. phase of the SHG Bank Linkage programme in February 1992, a landmark development in banking for the poor in India. The June 2009 | 41
  • 41. SHG-informal thrift and credit groups of the poor came to be • maintain expert staff to study all problems relating to recognised as bank clients under the pilot phase. The strategy agriculture and rural development and be available for deployed for this programme involved forming small, cohesive consultation to the Central Government, the Reserve Bank, and participative groups of the poor and encouraging them to the State Governments and the other institutions engaged pool in their thrift regularly which will be used to make small in the field of rural development. interest-bearing loans to members and learning the nuances of • provide facilities for training, for dissemination of information financial discipline in the process. Apart fromt his approach, and the promotion of research including the undertaking of NABARD also took a conscious decision to experiment with studies, researches, techno-economic and other surveys in the other successful models such as replicating the Grameen model, field of rural banking, agriculture and rural development. financing NGO-MFIs, etc. • provide technical, legal, financial, marketing and The Bank commenced a nationwide Pilot Project in 1992 administrative assistance to any person engaged in agriculture aimed at promoting and financign 500 SHGs across the coutnry. and rural development activities. The SHG-bank linkage strategy includes financing of SHGs • may provide consultancy services in the field of agriculture promoted by external facilitators like NGOs, bankers, government and rural development and other related matters in or outside agencies and individuals as also promotion of SHGs by banks and India, on such terms and against such remuneration, as may fonancing SHGs directlyby banks or indirectly where NGOs and be agreed upon. similar organisations act as financial intermediaries. The pilot was In this context, the role of training in NABARD and the followed by the settign up of a Workign Group on NGOs and role played by it for capacity building in client institutions, SHGs by the Reserve Bank of India in 1994 which gave a number partner agencies and other developmental agencies is important. of recommendations on the internalisation of the SHG concept as For maintaining ‘Expert Staff ’, the Bank needs to provide an intervention tool in the area of banking with the poor. Based continuous exposure to its officers and staff for upscaling their on the pilot and the recommendations of the Working Group, knowledge and skills in core areas. In the initial years the Bank NABARD, in 1998 crystallised its vision for providing access to had recruited expert staff from various technical disciplines and one third of the rural poor by linking 1 million SHGs by 2007. created a separate cadre of officers. These officers were involved This target was achieved in the year 2004 by massive scaling up in formulating, appraising, monitoring and evaluating different of the training and capacity building awareness programmes agricultural projects implemented by different credit agencies. by NABARD covering a large number of officials and staff of These officers, irrespective of their academic background, were NGOs, banks, government agencies and rural volunteers in SHG imparted similar type of training as all other officers. Their promotion, nurturing, appraisal and financing. placements and the regular job rotations helped in grooming them to take up assorted assignments, get involved in a variety of roles and functions including credit, developmental, Highlights of SHG bank linkage programme promotional, supervisory and necessary support and information (as on 31 March 2006) for decision making. In pursuance of the Bank’s mandate as stated in the Act, the • During the period April 2005 to March 2006, 620109 new Bank provides training facilities for the RFIs and agencies involved SHGs were financed by banks to the tune of Rs 44.99 billion in rural development through the Bankers Institute of Rural by way of loans. Cumulatively, banks have lent Rs 113.97 billion to 2238565 SHGs. Development (BIRD), Lucknow and the two Regional Training • NABARD has extended a refinance of Rs 10.68 billion to Centres in Bolpur and Mangalore. With a view to broadbase the banks during 2005-06 bring the cumulative refinance amount training and capacity building efforts, the Bank encourages the to Rs 41.60 billion. Regional Finance Institutions to set up their own training systems • 44362 branches of 545 banks (Commercial banks- 47; Regional and provides these training institutes the necessary support to Rural banks-158; & Cooperative banks - 340) situated in 583 conduct meaningful and quality training. The bank continuously districts in 30 states of the country are participating in the examines the options and avenues for strengthening the training programme. interventions at the client level so that the human resources • About 32.98 million poor households have gained access in these institutions are developed to take on the challenges, to formal banking system through SHG bank linkage reckon with the competition, improve customer service, expand programme. outreach, develop suitable products and thereby contribute to • Nearly 90% of the groups are women groups. rural development. As NABARD primarily functions through other agencies, the needs of the client institutions largely determine the knowledge Developmental mandate of NABARD and skill requirements of NABARD officers. The Bank endeavours The provisions of the NABARD Act, 1981 clearly indicate the to blend the experiences of client bank training with the training nature and scope of the developmental mandate of the Bank and for NABARD officers so as to make training meaningful its role in training and capacity building with the underlying and relevant to their roles. Efforts are also made to blend the belief that the process of development cannot be accomplished by study findings with the outcome from training to periodically credit/refinance alone. Section 38 of the NABARD Act provides measure the overall impact of the investments made in the that the Bank shall: training efforts. i4d | June 2009 42
  • 42. RENDEZVOUS RENDEZVOUS: GLOBAL CONFERENCE ON FINANCING THE POOR: MOVING BEYOND INCLUSION, MICROFINANCE CONNECT, 29 DECEMBER 2009, NEW DELHI, INDIA Exploring the Impact of Microfinance As the world is in the grip of a global fi- processes, discuss the past attempts, issues of capital. The clients require safety, trust, nancial recession which has a far reaching and impediments in enhancing impact and convenience and access of information; an impact on the development process across present the concept and objectives of the MFI needs technology for cost effectiveness the world the poor are most vulnerable Global Microfinance Impact Alliance. and process automation; Loan Officials and the most affected by such crisis as they More than 150 delegates from MFIs need information sharing, and efficient have very limited capacity to cope with the and NGOs, banks and financial institu- transaction, IT facilitates all such services. recession. Microfinance which is an effec- tions, apex bodies and networks, advocacy He believes that advanced technology is tive tool of poverty eradication, capacity and support institutions and researchers going to play an important role in future building, social empowerment, also seems and students participated in the con- development of microfinance industry as to be affected by the financial crisis as the clave. Representatives from the World its application will bring down the trans- interest rate increases and credit squeezes. Bank, European Commission, Grameen action cost and helps in management too. Realising the significance of the current sce- Foundation, Sonata Finance, Oikocredit, Therefore, technology is related to every as- nario, a Global Conclave of Microfinance Unitus Capital, Plural India, Centrer for pect of the microfinance system and is very Connect on 'Financing the Poor: Moving Microfinance, Michael and Susan Dell crucial for it’s control and regulation. He beyond Inclusion' was organised on 29th of Foundation, Infrasoft Tech, GRAMAUS is of the opinion that advanced IT-enabled April, 2009 at The Park Hotel, New Delhi, Bangladesh, ASA Initiative Ghana, Sri- system is required for providing new kind India. The theme of this conclave was to krishna Institute of Management were the of banking services such as mobile banking look at the emerging new dimensions of panelists for the conclave sessions. The and branchless banking, etc. the microfinance movement in the cur- event was sponsored by Infrasoft Tech, a In her inaugural address, Ellen Pender- rent global scenario. Traditionally, banks leading software company for the banking sen, European Union discussed the experi- or Microfinance Institutions (MFIs) had and finance industry. Sambodhi Research ences of the European Union in assessing offered small lendings/credits which had and Communications was the knowledge impacts of microfinance projects. She stat- been perceived as a tool for poverty allevia- partner and Microfinance Insights was the ed that relevance, efficiency, effectiveness tion and reduction of financial exclusion media partner. and impact were four criteria on which a - bringing the poor and unbanked in the In his welcome address, Kultar Singh, project’s performance was evaluated by the mainstream of financial services and social CEO, Sambodhi accentuated the need to Union. Mohini Malhotra, South Asia Re- empowerment of the weaker sections of assess impact and outreach of microfinance gional Coordinator, World Bank Institute, the society. Now, the microfinanace sector on the lives of the poor and the need to pointed out that cost effectivenes, lower has been transformed. It has become more think beyond the traditional aspect of the interest rates and user friendly technologies diversified, commercialised, and competi- microfinance movement. He pointed out hold the key for success of microfinance tive and has grown bigger than ever before. that it only requires a small effort to reach movement. In the particular context of MFIs have moved beyond credit to offer the poor and provide livelihood to them. India, she stated that we had come a long insurance and savings products. Hence, it He also asserted that despite the current way but there still is a lot to do as we have is pertinent to address the new paradigm global recession, the microfinance sector covered less than five per cent of the rural shifts and scale the impact and outreach would grow exponentially and it had the households of the country. She quoted the of the microfinance sector and assess the potential to reach 80-82 million people remarkable success of Bangladesh, where role of new actors in the changing process. by 2010-12. Hanuman Tripathi, MD, around 40 per cent households have access The Global Microfinance Connect Con- Infrasoft Tech discussed about the multiple to banking services. clave 2009 provided a platform to share applications of IT software in the delivery Other key speakers were Geeta Goel the practical experiences from the field on of microfinance services and to assess its (Michael and Susan Dell Foundation), impact of microfinance operations, pres- impact. From the donor point of view, IT Justin Oliver (Centre for Microfinance, ent the key assessment methodologies and is required for transparent and smooth flow Institute for Financial Management and June 2009 | 43
  • 43. Research, Chennai), Chandni Ohri (Grameen Foundation), beyond traditional dimensions of microfinance to a more results, A Ramanathan (Ex-Chief General Manager, NABARD), Md outcomes and impact-focused approach, secondly, a shared un- Abdul Khaleque, Suvarna Rani Gandham (India Regional derstanding also emerged during the meeting that there is need Manager, Oikocredit and Managing Director Maanavaveeya of methodologies for the impact assessment of microfinance Holdings), Ashish Gupta (Sonata Finance), Eric Savage (Unitus operations. Thirdly, the conclave also emerged as a platform for Capital), N V Ramana (Ex-CEO BASIX group), Shivendra promotion and dissemination of knowledge and information Sharma (Executive Director, Plural India) and Veronica Agodoa regarding microfinance projects and services among different Kitti (Managing Director, ASA Initiative, Ghana). During the societies and at various levels around the world, for instance, a day long deliberation, all delegates shared their field experiences 20 minutes film and a photo exhibition were displayed showcas- on impact of microfinance operations, assessment findings and ing impact of microfinance of various organisations from India, methodologies, issues and challenges. Chandni Ohri introduced Nepal, Peru, Ghana, Philippines and Cambodia. the Grameen Foundation’s Progress out of Poverty Index (PPI), Last but not the least the conference concluded with an and how it can be used as both a management and a measure- award ceremony celebrating the best practices in microfinance ment tool. She explained that it allows MFIs to better determine operations across the world. And the winner of the first Global their clients’ needs, which programmes are most effective, how Micro Finance Impact Awards 2009 was Amhara, Credit and quickly clients leave poverty, and what helps them to move out Saving Institution of Ethiopia, and BISWA from Orissa, India of poverty faster. Gandham suggests that a “one-time touch and was awarded Forerunner. go” policy is not what MFIs should aim for, a permanent access to Today microfinance is not seen as a charity business. Due to credit is needed for development and empowerment. She argued it’s commercialisation and product diversification it has become a that social impacts of microfinance were remarkable, particularly profitable business venture and MFIs are transforming themselves in rural areas of India. It has changed the attitude of the men in from non-profit organisations to profit making organisations. We a family towards women. The microfinance movement is bring- should keep in mind the fact that the prime motto of MFIs should ing hope, prosperity, a sense of security and progress to many of not be profit making but to change the financial system to make the poorest people across the world. She feels that microfinance it all-inclusive. To take full advantage of microfinance, it is crucial approaches for the poor are a necessary ingredient in poverty al- for the industry to continue to innovate, evolve and bring more leviation, empowerment of the weaker sections of the society, and economically active poor in its ambit. To this end, interaction to end their financial inclusion but suggests that sustainability and among intelligentsia and the practitioners for knowledge sharing affordability of MFIs are quite important for their success. Ashish and assessment of new trends are necessary. The conclave which Gupta introduced the study report of MiRacle software which is a is slated to be an annual event seems to be an appropriate forum pilot impact assessment and rating and practitioner-friendly tool for promotion and dissemination of knowledge and expansion for assessing client level impact. He shared his experiences of north of the microfinance sector which provides economic lifeline for India, particularly Uttar Pradesh and Madhya Pradesh. millions of poor across the world. The main outcomes of the conclave were the beginning of the Dinoj Kumar Upadhyay Global Impact Alliance that would further the agenda of moving WNS receives the 2009 Golden Peacock Award WNS (Holdings) Limited has been awarded the 2009 Golden Peacock Eco-Innovation Award for its Green Lean Sigma Programme by the World Environment Foundation, in association with the Institute of Directors. WNS, a leading provider of global business process outsourcing (BPO) services, was recognized by a distinguished panel of judges for its organization wide initiative, aimed to make WNS a carbon neutral company leveraging Six Sigma, LEAN and ISO methodolo- gies. This effort was led by Shubra S Sachdev, Associate Vice President, Business Process Excellence and Transformation and Ujjwal Majumdar, Chief Quality Officer. The Golden Peacock Awards (GPA) is a set of prestigious national and global awards designed to improve productivity and quality in organisations. It aims to promote business excellence by providing a Framework or Criteria for assessment that is based on similar principles as other awards throughout the world. The Golden Peacock Awards jury is chaired by Justice P N Bhagwati, former Chief Justice of India and Member, UN Hu- man Rights Commission. The jury is comprised of distinguished personalities from the business, political, regulatory and academic communities, including, among others, Right Honorable Joe Clark , Former Prime Minister of Canada; Ola Ullsten, Former Prime Minister of Sweden; Olivier Giscard d’Estaing, Founder and MD, INSEAD; James McHugh CBE, Former Chairman, British Gas; James McRitchie , Publisher Corporate Governance, California; Prof Viviane de Beaufort, Essec Business School, France; Justice M N Venkatchaliah, Former Chief Justice of India and Chairman, Institute of Directors; Gauri Kumar, Director General, NIFT; and Rakesh Bharti Mittal, Vice Chairman and Managing Director, Bharti Teletech. i4d | June 2009 44
  • 44. 3-4 November 2009 What’s on 4th International Conference on E- Commerce Penang Africa 13-18 July 2009 Singapore 28-30 October 2009 Media, Democracy and Governance: 26 August 2009 IDIA2009 Conference Emerging Paradigms in a Digital Age International Conference on Energy and South Africa New Delhi Environment (ICEE 2009) 2009/3rd.html conf2009cfp.htm 18-20 August 2009 14-16 September 2009 Map Asia 2009 Australia Indian Environment Summit 2009 Suntec Singapore International 15-18 November 2009 New Delhi Convention & Exhibition Centre 2009 Asia Pacific Conference on Child Abuse and Neglect Perth, Western Australia 9-11 September 2009 14-16 September 2009 National Seminar on “ICT for Agriculture Outlook Asia 2009 Agriculture and Rural Development” Grand Hyatt 20-25 March 2010 Pasighat, Arunachal Pradesh World Congress of Internal Medicine Melbourne, VIC Thailand Japan 4-6 October 2009 24-28 August 2009 3rd Vaccine Global Congress Bangladesh The 3rd International Symposium Bangkok 17-19 December 2009 on the Environmental Physiology of International Conference on the Ectotherms and Plants Developments in Renewable Energy Tsukuba United States Technology 4-7 October 2009 Dhaka index.html HighEdWeb 2009: Open. Connected Milwaukee, WI Malaysia Europe 6-9 July 2009 31 August–4 September 2009 26-30 October 2009 6th International Conference on IT in World Climate Conference-3 mLearn 2009 - 8th World Conference on Asia 2009 Geneva, Switzerland Mobile and Contextual Learning Kuching, Sarawak Orlando, Florida index_en.html 31 August-3 September 2009 28-30 October 2009 Sustainable Energy Technology International Conference on Information (SET) 2009 Technology (ICIT 2009) North Rhein Westfalia, Germany Chicago knowledge for change 22-23 October 2009 Gender, Media and the Public Sphere United Kingdom Coimbra, Portugal 29-30 June 2009 European Conference on e-Government London India home.htm 16-18 July 2009 25 - 27 August 2009 20th Skoch Summit - Banking, 28-29 September 2009 Financial Services and Insurance Hyderabad, India Energy From Waste Mumbai, Maharashtra London ent&view=article&id=165&Itemid=209 asp?is=5&ref=3142 June 2009 | 45
  • 45. IN-FACT Microfacts about microfinance • In Africa, women account for more than 60 per cent of the rural labour force and contribute up to 80 per cent of food production, yet receive less than 10 per cent of credit provided to farmers. • The World Bank estimates at there are now over 7000 microfinance institutions, serving some 16 million poor people in developing countries. The total cash turnover of MFIs worldwide is estimated at US$2.5 billion and the potential for new growth is outstanding. • There is concern that official assistance will be diverted from vital primary care aid programmes such as health, water projects and education into MFIs, owing to their popularity among donors. • Though women appear to benefit most, studies indicate that many loans awarded to and paid back by women are in fact used by men. • The widely-imitated Grameen Bank in Bangladesh aims to provide credit to those with individuals and families with credit from Grameen Bank, in extreme poverty. Some 94 per cent of those who meet more than 48% rose above the poverty line. the bank’s criteria and take up loans are women. Grameen • It is estimated that worldwide, there are 13 million borrowers keep up repayments at a rate of around 98 per microcredit borrowers, with USD 7 billion in outstanding cent. The Bank lends US$30 million a month to 1.8 million loans, and generating repayment rates of 97 percent. It has needy borrowers. been growing at a rate of 30 percent annual growth. • Savings are important both as a vital safety net for the poor • Fewer than 2 per cent of poor people have access to financial and as a source of funding that does not rely on external services (credit or savings) from sources other than money sources. Many strong MFIs, notably in Africa, recycle the lenders. savings of needy clients as a principal source of loan funds • Under 10 million of the 500 million people who run micro for their customers. and small enterprises have access to financial support for • The Microcredit Summit estimates that US$21.6 billion their businesses. is needed to provide microfinance to 100 million of the • There is a potential demand for microcredit services from world’s poorest families. The Summit planners say it should seven million borrowers. be possible to raise US$2 billion from borrowers’ savings • There is a potential demand for microsavings services from alone. The final figure may be even higher. 19 million savers. • Studies have shown that during an eight year period, among • The world’s seven richest men could wipe out global poverty. the poorest in Bangladesh with no credit service of any type, Their combined wealth is more than enough to provide the only 4 percent pulled themselves above the poverty line. But basic needs of the poorest quarter of the world’s people. Source: Hari Srinivas, The Global Development Research Centre (GDRC), 46 i4d | June 2009
  • 46. i4d invites feature articles on 'mobiles 4 development' The August 2009 issue of i4d magazine focuses on 'mobiles 4 development'. We encourage a wide variety of submissions on the topic areas outlined below: ! Rural connectivity ! Financial inclusion through mobile phones ! Education through mobile phones ! Assisting farmers through mobile technologies ! m-Health: Healthcare through mobiles An ideal feature article (two-pager) should be between 1400-1600 words. Case studies should be between 1600-2200 words. Graphs, charts, tables and pictures should be sent separately in high- resolution (300 dpi or more) .jpeg, .tif or .bmp format. Along with the manuscript, authors/contributors should submit their brief profile and photograph. Submission deadline is 10 July 2009. e-mail all submissions to
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